US: Consumer sentiment off the ropes, infaltion expectations tick up – Wells Fargo

The preliminary October report of the University of Michigan's Consumer Sentiment showed an increase in sentiment and also in inflation expectations. According to analysts at Wells Fargo, critical long-term inflation expectations remain at a level the Federal Reserve will still consider well-anchored. 

Key Quotes: 

“The preliminary release of consumer sentiment from the University of Michigan for September revealed a modest increase in optimism. Overall sentiment rose to 59.8, a 1.2 point gain from 58.6 a month earlier. Sentiment was lifted by consumer views of current conditions specifically, which jumped by the most in over a year and a half to a reading of 65.3.”

“Short-term expectations remain more volatile and are still at an elevated level of 5.1%. More importantly, longer-term expectations remain well-within the past decades range. At 2.9%, the Fed will still view expectations as "well-anchored", a topic it puts great emphasis on when setting monetary policy.”

“Even with expectations remaining well-anchored, we expect the Fed will continue with another super-charged 75 bps rate hike at its November 2 meeting.”