US consumers' median inflation expectations over the next 12 months fell to roughly 4.5% in July, according to data highlighted by The Kobeissi Letter, near the lowest reading since the first quarter of 2025. The pullback follows a brief spike to about 5.2% in March, the highest level households had reported since August 2025.
The swing between March's spike and July's retreat illustrates how quickly consumer sentiment on prices can move in response to tariff headlines, energy costs and other short-term shocks, even when underlying inflation trends are moving more gradually.
A separate, more granular gauge tells a consistent story. The New York Fed's own Survey of Consumer Expectations, which uses a different methodology and sample than the measure Kobeissi cited, showed median one-year inflation expectations easing to 3.6% in July, down 0.1 percentage point from June's 3.7%. Three-year expectations held steady at 3.3% and five-year expectations at 3.0%. Full results are published on the New York Fed's Survey of Consumer Expectations page.
Two Surveys, One Direction
The two measures differ in absolute level, unsurprising given they poll different samples with different question wording, but both point the same way: inflation anxiety among US households has cooled from a spring peak. That matters for the Federal Reserve, which watches inflation expectations closely as a proxy for how embedded price pressures have become in household behavior, from wage demands to spending patterns.
Broader Sentiment Also Improved
The New York Fed's July survey found more than just easing price expectations. Households' perceptions of their current financial situation compared with a year earlier improved, and expectations for the year ahead also brightened, with a smaller share of respondents anticipating a worse financial position twelve months out. Taken together, the data suggests the anxiety that pushed inflation expectations higher earlier this year has started to unwind, at least for now.
