Fears of inflation consumer up? Not a concern, SF Fed says

CHICAGO  - anxiety of growing consumer prices are largely to the increase should not trigger a response in the fight against inflation in the US Federal Reserve, according to research from the Monday of the San Francisco Fed.

This is because consumers are not particularly well to the inflation forecast, according to the research, published in the last economic letter of the regional Fed Bank. Households tend to make their worst assumptions about future when inflation spike of fuels and food products, as they have in recent months.

Makers watching closely, inflation expectations because when people expect higher prices they often change their behavior so as to make these expectations a prediction.

But research suggests that they are probably safe ignore the tonnage of the survey widely followed by at least one of the fears of domestic inflation. He compares forecasts inflation at Thomson Reuters/University of Michigan consumer sentiment survey against actual inflation over the past eight years.

These recent survey data show households now expect inflation to about 4.5 per cent on average over the next 12 months, a year expectation big jump last of 3 percent.

The increase is probably due to the sharp rise of the food and energy prices that households are particularly sensitive, Counsellor of research of San Francisco Fed Bharat Trehan said.

Households in the survey of inflation provided an average of 1.1 percent over the past five years, when prices of commodities have been particularly unstable, Trehan has shown.

Consumer inflation expectations has also increased in 2008, when energy prices similarly enriched, but actual inflation eventually falling, not rising.

"Households seem to respond to recent evidence of inflation in a way that is not justified by actual inflation dynamics," Trehan said in the document. "The poor performance of forecast militates against reacts strongly to the recent increase of household inflation expectations."

Data outputs a week and a half show U.S. consumer prices have increased to a maximum of 2 1/2 years of 3.2% in the 12 months to April.

The pace of food and fuel price rises slowed since the month of before, however, suggesting inflationary pressures can be achieved.

Most Fed officials expect increases in the prices of products of short duration, a view born this month decrease in oil prices. San Francisco Fed President John Williams earlier this month it said it believes that inflation will begin falling in the workplace of the year, sinking well below unofficial target of 2% of the Fed next year.

Primary dealers interviewed by Reuters, last week see the price index rose by 3% in the fourth quarter.