Inflation expectations are how consumers predict future price changes. Recent surveys show that Americans expect a temporary increase in inflation due to tariffs, viewing this as a short-term issue rather than a long-term threat to the economy.

Tariffs, which are taxes on imported goods, can raise domestic prices. Consumers believe these price hikes will be fleeting, indicating confidence in a resilient economy.

The Federal Reserve monitors inflation expectations closely. If consumers believe inflation will remain high in the long run, it may create a cycle of rising prices.

Consumer behavior is heavily influenced by inflation expectations. As people anticipate short-term price increases, they might adjust spending habits but are likely to maintain long-term financial plans if they believe these changes are temporary.

Businesses also adapt based on inflation expectations. If they see tariffs as a temporary issue, companies may hold off on major adjustments to pricing or hiring, opting to absorb short-term cost increases instead.

Keeping long-term inflation expectations stable is key to economic health. When people trust that inflation will remain low, it supports stable interest rates, encourages investment, and fosters consumer confidence, vital for growth.

The Federal Reserve will continue to watch inflation expectations closely. The economic recovery hinges on confidence in stable long-term inflation, and changes in trade policies could help ease short-term pressures and stabilize expectations.