Inflation fears receded in May as Trump eased some tariff threats, New York Fed survey shows

Americans are feeling less concerned about inflation as President Donald Trump eases off on his tariff threats, according to a recent survey by the New York Federal Reserve. The Survey of Consumer Expectations showed a significant decrease in the one-year inflation outlook, dropping to 3.2% in May from 3.6% in April. This shift in sentiment is a positive sign and reflects a change in attitude that coincided with Trump’s tariff announcements.

Initially, Trump had imposed 10% tariffs on all U.S. imports and threatened reciprocal duties on numerous countries. However, he later decided to enter a 90-day negotiating period, which will come to a close in July. This move has helped alleviate some of the fears surrounding inflation caused by the tariffs.

The survey also revealed a decrease in inflation expectations across various time horizons. The three-year outlook dropped to 3% from 3.2%, while the five-year forecast edged down to 2.6% from 2.7%. Although these figures still exceed the Fed’s 2% target, they show progress in curbing inflation concerns.

National Economic Council Director Kevin Hassett highlighted the positive trend in inflation, noting that it has decreased significantly in recent years. The Fed’s preferred measure, the personal consumption expenditures price index, stood at 2.1% in April, matching its lowest level since February 2021. Excluding volatile food and energy prices, core PCE was at 2.5%, signaling a more stable inflation rate.

Respondents in the survey also indicated a rise in food prices by 5.5% over the next year, the highest since October 2023. However, expectations for gas price increases eased to 2.7%, down from previous months. Furthermore, respondents expressed optimism in employment prospects, with fewer individuals expecting to lose their jobs in the next 12 months.

Overall, the survey paints a positive picture of the economy, with decreasing inflation expectations and improved confidence in various sectors. As the trade tensions ease and negotiations continue, Americans are becoming less fearful of inflation, providing a glimmer of hope for economic stability in the coming months.