“This more or less mutes calls for a 100 basis point hike next week,” said Jennifer Lee, senior economist at BMO Capital Markets in Toronto.
The University of Michigan survey’s reading of one-year inflation expectations fell to 4.6%, the lowest since September 2021, and compared with 4.8% in August.
The survey’s five-year inflation outlook slipped to 2.8%, falling below the 2.9%-3.1% range for the first time since July 2021.
“The Fed is likely to find some comfort in the fact that inflation expectations to this extent don’t appear to have become unanchored,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.
“The Fed’s message on inflation expectations has shifted toward the importance of keeping expectations anchored, rather than relying on it to downplay higher inflation rates.”
US stocks traded lower, while the dollar fell against a basket of currencies. US Treasury bond prices were trading lower.
Following the release of strong consumer price readings for August on Tuesday, financial markets priced in the likelihood that the US central bank would raise its overnight benchmark interest rate by 75 basis points at its meeting on 20 and September 21, with the possibility of 100 points, according to the CME FedWatch tool.
