Are inflation expectations running high, or running low? It depends on how you look at it. Preliminary responses to the University of Michigan’s monthly survey showed that people expect inflation of 2.3 percent over the next year. That is higher than the Labor Department’s most recent annual reading of 1.6 percent.
If you adjust for the fact that people always overestimate expected inflation, though, it is historically low. Indeed, the last time year-ahead inflation expectations were so cool was in September 2010.
To judge from their online habits, however, people’s confidence in low inflation might be starting to melt. Google Trends shows that searches on inflation have picked up steadily this fall and are now at their highest monthly level since October 2008, when inflation was running 3.7 percent.