MNI BRIEF: Fed's Favored Inflation Expect Index Near 7yr High

One of the Fed's preferred gauges for inflation expectations has edged above 2%, fresh data release Friday showed, hitting the highest level since December 2014.

The Index of Common Inflation Expectations was updated with data through March and shows that inflation expectations came in at 2.01%, after falling to 1.93% in March 2020 and steadily drifting lower since the financial crisis. The CIE index combines 21 market and survey measures into a single view of how households and businesses expect prices to behave.

Outlining the CIE's relevance, Fed Vice Chair Richard Clarida said Wednesday at a Manhattan Institute event if the index of expectations were to "drift up persistently" or fall considerably below 2%, "that would indicate to me that policy would need to be adjusted." He added that the Fed's "metric of success" on the central bank's new long-term framework is keeping expectations about future price increases anchored at 2%.