American consumers expect rapid price increases due to tariffs to be short-term rather than permanent, according to a recent survey. The median inflation expectations for the year ahead rose by 0.5 percentage point to 3.6% in March, but long-term expectations remain stable at 3% over the next three years and 2.9% over the next five years.
The Federal Reserve Chair Jerome Powell agrees that while tariffs may cause a temporary rise in inflation, it’s possible for them to be more persistent if not managed properly. The Fed will focus on keeping longer-term inflation expectations anchored and making sure one-time price increases don’t become ongoing problems.
However, other measures of inflation expectations suggest a different story. Year-ahead inflation surged to the highest level since 1980, while long-run inflation expectations climbed to 4.4%. These findings are in line with financial market sentiment that suggests the trade war may lead to recession rather than inflation.
Meanwhile, consumers are bracing for slower income growth and a weaker labor market, with 44% of respondents expecting an increase in unemployment rates within the next year. The average consumer also projects lower household pay growth, down by 0.3 percentage point from February.
The latest survey also shows that Americans have become increasingly pessimistic about the economy’s outlook, with optimism at a 12-year low. President Trump now faces economic discontent similar to what plagued the Biden administration.
Source: https://www.axios.com/2025/04/14/trump-tariffs-inflation-expectations-fed