
Inflation expectations
One bright spot from the report came from the decline in inflation expectations, which showed the biggest drop in months. Inflation expectations for 12 months in the future fell to 3.8% from 4.1%, while the long-term, five- to 10-year expectation fell to 2.8% from 2.9%. The overall declines in expectations are quite surprising given the rebound in inflation in recent months. One reason might be the impact of lower gasoline prices. But for whatever reason, the decline in inflation expectations is welcome as the Federal Reserve tries to balance multiple goals, which now include maintaining stability in the financial system.