The Federal Reserve continues to face an ugly dilemma: The growth
numbers don’t look good, but the inflation numbers are off the charts. That trend
continued into May, according to the latest figures from the University of Michigan. The group’s confidence index
dropped to 59.5 from 62.6 in April. That’s the lowest reading since June 1980. Indices that track both current
conditions and the outlook for the future slumped.
Here’s the kicker: An index that measures inflation expectations for the next year
jumped. Consumers now expect inflation to run at a 5.2% page over the coming 12 months.
That’s up from 4.8% in April and the highest reading going all the way back to February 1982 (a tie). Five-year forward
inflation expectations climbed to 3.3% from 3.2%. That’s the highest reading since
August 1996 (a tie).
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