Business inflation expectations fell to 1.93 percent in February, matching the average level from 2015 to 2019 and marking the lowest reading since November 2020, according to the Federal Reserve Bank of Atlanta’s Business Inflation Expectations survey released Wednesday.
The February figure represents a sharp decline from 2.27 percent a year earlier and continues a downward trend that has seen expectations fall in nine of the past ten months. The reading is now at precisely the median level that prevailed during the 2015-2019 expansion, when inflation consistently undershot the Federal Reserve’s 2 percent target despite years of monetary stimulus and falling unemployment.
The Atlanta Fed data aligns with findings from the Cleveland Fed’s Survey of Firms’ Inflation Expectations, which showed businesses expect general inflation of just 3.1 percent over the next 12 months. That figure is down from a peak of 3.9 percent last year and far below the readings above seven percent recorded during President Joe Biden’s term in office.
The data represent a striking disconnect from expert predictions about tariff-driven inflation. Businesses, the entities that would actually feel the impact of rising import prices and implement price increases, expect their unit costs over the next 12 months to rise at the same modest pace that characterized the early Trump years, not the sustained inflation surge that economists and policymakers warned tariffs would unleash.
The Atlanta Fed survey asks business executives to assign probabilities to different inflation scenarios for their own unit costs over the coming year, providing real-time insight into price-setting expectations. The return to 2015-2019 levels suggests businesses view the current environment as a return to pre-pandemic normalcy rather than the beginning of an inflationary crisis.
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