Short-term inflation expectations have declined sharply, according to the Federal Reserve Bank of New York’s February Survey of Consumer Expectations.
The one-year ahead expectations dropped by 0.8% to 4.2%, while three-year ahead expectations remained unchanged at 2.7% and the five-year ahead expectations rose 0.1% to 2.6%.
The market continues to rethink the Fed’s rate hike decision at the March FOMC meeting.
According to the CME FedWatch Tool, the fed funds futures market is pricing in a 64.2% probability of a 25 basis points rate hike and a 35.8% probability of no rate hike.