June 10, 2019 / 3:02 PM / 3 months ago

U.S. consumers' inflation view lowest since late 2017: NY Fed survey

NEW YORK (Reuters) - U.S. consumers’ inflation expectations deteriorated to their weakest levels since late 2017 in May, while their views on jobs and family finances grew less certain, according to a Federal Reserve Bank of New York survey published on Monday.

The weakening in inflation expectations may factor into U.S. Fed policymakers’ decision whether to lower interest rates in the coming months to help boost U.S. price growth towards the central bank’s 2% goal.

“One of the justifications for the Fed to cut rates this year will be the surprisingly weak inflation,” Craig Dismuke, chief economist at Vining Sparks, and Dudley Carter, economic analyst at the firm, wrote in a research note.

The survey of consumer expectations, which the Fed considers along with other data on U.S. price pressures, showed consumers’ one-year inflation outlook dropping 0.1 percentage point to 2.5% last month.

The survey’s three-year inflation measure also fell by 0.1 point to 2.6%.

(GRAPHIC: U.S. consumer inflation expectations link: tmsnrt.rs/2R3be6Q)

The drop in consumers’ inflation outlook followed a disappointing U.S. payrolls report on Friday, which showed a sharp slowdown in domestic job growth in May. Analysts said businesses worried that trade tensions between the United States and its trading partners were scaling back hiring.

The New York Fed survey is done by a third party that taps a rotating panel of about 1,300 household heads.

The latest New York Fed survey showed some uncertainty creeping into consumer sentiment on labor conditions and household finances, even as expectations for wage gains improved a bit to 2.5% last month.

The New York Fed’s gauge on consumers’ view of unemployment rising a year from now increased by 1 point to 36.7%, but a barometer on confidence to find a job increased to 61.5% in May, the highest since the series began in June 2013, from 59.3% in April.

Median expectations on household income growth dipped to 2.8% from 2.9% in April.

On Monday, U.S. interest rates futures implied traders expect the Fed to lower its benchmark overnight lending rate by at least 50 basis points by the end of the year, according to CME Group’s FedWatch program.

(GRAPHIC: Trade tensions boost U.S. rate-cut expectations png link: tmsnrt.rs/2KdE2by).

Reporting by Richard Leong; Editing by Susan Thomas and Paul Simao

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