U.S. consumers' inflation outlooks drop sharply, NY Fed survey shows

(Reuters) - U.S. consumers' expectations for where inflation will be in a year and three years dropped sharply in July, a New York Federal Reserve survey showed on Monday, indicating U.S. central bankers are winning the fight to keep the outlook for price growth well-anchored as they battle to tame high inflation.

Median expectations for where inflation will be in one year tumbled 0.6 percentage point to 6.2% and the three-year outlook fell 0.4 percentage point to 3.2%, the lowest levels since February of this year and April of last year, respectively.

For the one-year outlook, the fall in expectations was driven by big drops in year-ahead price growth changes for gasoline and food, with the decline in anticipated gasoline price growth being the second largest in the survey's nine-year history and the decline in food price growth the largest ever.

Inflation expectations are a key dynamic being closely watched by Fed policymakers as they aggressively raise interest rates to contain price pressures running at four-decade highs. The Fed has raised its policy rate by 225 basis points since March as it seeks to return inflation to its 2% goal.

In June, the deterioration in U.S. consumers' inflation outlook was cited by policymakers who pushed through a 75-basis-point interest rate hike at their policy meeting that month. Fed officials have flagged that the possibility of another rate rise of that magnitude will depend on inflation, employment, consumer and economic growth data between now and their next policy meeting on Sept. 20-21.