Inflation Expectations Plummet: Is U.S. Price Pressure Finally Easing?

In early June, U.S. consumer sentiment jumped sharply as tariff threats subsided and energy prices eased. But this renewed optimism may be fragile, built more on temporary relief than lasting fundamentals.

Confidence Rises Sharply

The Michigan index hit 60.5—far above expectations. Expectations for future conditions surged nearly 22%, driven by the Trump administration’s decision to pause tariff hikes and reopen negotiations with China.

Temporary Calm, Not Structural Change

The rebound is largely due to two things: a 90-day “policy vacuum” and high pre-tariff inventory levels. Neither reflects real improvement. Once negotiations end and inventories thin out, both prices and sentiment could turn quickly.

Inflation Expectations Retreat—for Now

One-year inflation expectations saw their steepest drop in over 40 years. Actual May inflation was just 0.1%, suggesting tariffs haven’t yet filtered through. But economists warn: the effects are delayed, not canceled.

What Smart Businesses Should Do

This is a window—not a trend. Use it to clear inventory, finalize favorable procurement terms, and prepare for a potential cost spike in Q3. Test price sensitivity while consumers are still receptive.

Fed Rate Cut? Not So Fast

Despite pressure from the White House, the Fed is unlikely to act before September. Until then, rates remain high and policy paths uncertain.

Strategic Takeaway

Lock in flexible financing now. Build tariff scenarios into your supply chain. Don’t mistake policy quiet for long-term clarity—the next shift may already be forming.