Consumer inflation expectations may have been more unanchored in 2025 than the late 1970s

US consumers’ short-term inflation expectations were, by one measure, more unanchored in early 2025 than the late 1970s, according to a new report from the Cleveland Fed’s Center for Inflation Research.

Professional forecasters’ inflation expectations have mostly remained close to the Federal Reserve’s 2 percent inflation target since 2000, with low disagreement between forecasters—two hallmarks of well-anchored expectations.

By contrast, consumers’ one-year-ahead inflation expectations peaked above 9 percent in early 2025. 

That’s below the 1970s peak as measured by the University of Michigan’s Surveys of Consumers. However, when Cleveland Fed researchers factor in how widely dispersed consumer forecasts were in early 2025, the degree of unanchoring exceeds the 1970s peak, according to the report’s authors, Robert Rich and Alexander Cline.

“Moreover, we demonstrate that this deterioration is linked to the self-reported political affiliation of survey respondents through changes in the distribution of their inflation expectations,” they write.

Read the Economic Commentary: How Anchored Are Short-Run Inflation Expectations Today? A Look at What Consumers and Forecasters Are Telling Us

More on inflation: The Center for Inflation Research