US: Consumer sentiment off the ropes, infaltion expectations tick up – Wells Fargo

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The preliminary October report of the University of Michigan’s Consumer Sentiment showed an increase in sentiment and also in inflation expectations. According to analysts at Wells Fargo, critical long-term inflation expectations remain at a level the Federal Reserve will still consider well-anchored.

“The preliminary release of consumer sentiment from the University of Michigan for September revealed a modest increase in optimism. Overall sentiment rose to 59.8, a 1.2 point gain from 58.6 a month earlier. Sentiment was lifted by consumer views of current conditions specifically, which jumped by the most in over a year and a half to a reading of 65.3.”

“Short-term expectations remain more volatile and are still at an elevated level of 5.1%. More importantly, longer-term expectations remain well-within the past decades range. At 2.9%, the Fed will still view expectations as “well-anchored”, a topic it puts great emphasis on when setting monetary policy.”

“Even with expectations remaining well-anchored, we expect the Fed will continue with another super-charged 75 bps rate hike at its November 2 meeting.”

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