Trump’s tariffs no longer seen as inflation threat

July 09, 2025 (MLN): President Donald Trump’s earlier tariff policies, once expected to spark a sharp surge in inflation, are no longer viewed as a major threat, according to the latest Survey of Consumer Expectations released by the New York Federal Reserve.

The survey found that consumers expect inflation to be at 3% over the next 12 months the same level recorded in January, before Trump assumed office and initiated aggressive tariff rhetoric.

This represents a 0.2 percentage point decrease from May and a notable decline from the 3.6% peak observed in March and April.

Trump’s initial move to impose broad 10% tariffs, alongside reciprocal duties on various U.S. trading partners, has recently shifted toward a more negotiation-based approach.

Despite these developments, inflation has remained subdued, with the consumer price index rising just 0.1% in May.

However, the annual inflation rate of 2.4% still exceeds the Federal Reserve’s 2% target.

Longer-term inflation expectations remained stable, with three-year and five-year projections holding at 3% and 2.6%, respectively.

While overall inflation expectations eased, the survey highlighted rising price pressures in several key categories.

Consumers foresee a 4.2% increase in gas prices, 9.3% in medical care the highest since June 2023, and 9.1% for both college education and rent. Food prices are expected to rise by 5.5%, unchanged from the previous month.

Labor market sentiment also improved, as CNBC reported.

The expectation of a higher unemployment rate one year from now dropped by 1.1 percentage points.

Additionally, the average perceived probability of job loss fell to 14%, the lowest level since December.

Copyright Mettis Link News