Americans are cooling down on inflation fears.
Median inflation expectations for the next 12 months dropped to ~4.5% in July—near the lowest we've seen since early 2025. That's a big shift from the ~5.2% spike back in March, which was the highest since August.
Average expectations also fell to ~5.5%, down from 6.2% in March. Both measures are now roughly 1.5 percentage points below their April peaks, right after those "Liberation Day" tariffs hit.
But here's the catch: 61% of consumers still think interest rates are going up over the next year. Same as June. No change in that sentiment.
So inflation expectations are easing, but rate expectations? Still stuck.
The Fed's job isn't done yet. People are watching their wallets, watching rates, and still not convinced the coast is clear. This is the kind of data that matters when you're trying to figure out where the market goes next.
Median inflation expectations for the next 12 months dropped to ~4.5% in July—near the lowest we've seen since early 2025. That's a big shift from the ~5.2% spike back in March, which was the highest since August.
Average expectations also fell to ~5.5%, down from 6.2% in March. Both measures are now roughly 1.5 percentage points below their April peaks, right after those "Liberation Day" tariffs hit.
But here's the catch: 61% of consumers still think interest rates are going up over the next year. Same as June. No change in that sentiment.
So inflation expectations are easing, but rate expectations? Still stuck.
The Fed's job isn't done yet. People are watching their wallets, watching rates, and still not convinced the coast is clear. This is the kind of data that matters when you're trying to figure out where the market goes next.