The inflation demon isn’t yet fully exorcized from the US economy.

University of Michigan sentiment printed a bad miss in the preliminary read for November, released on Friday, but the more important takeaway was another brush with the highest longer-term inflation expectations in a dozen years. “Another” because we’ve seen this movie before.

On June 13, 2022, Wall Street Journal “Fed whisperer” Nick Timiraos tipped Jerome Powell’s intention to escalate rate hikes to 75bps. There were two data releases which informed the Fed’s decision to up the ante. One was the May 2022 CPI report. The other, delivered just an hour and a half after the worst monthly inflation report in a generation, was a 3.3% reading on five- to 10-year University of Michigan inflation expectations (and an attendant all-time low for the headline sentiment gauge).

That print (the 3.3%) was the highest since 2008 and it pointed to a nascent unanchoring of longer-term expectations, the stuff central bankers’ nightmares are made of. Later that month, the final read on University of Michigan sentiment found the offending longer run expectations print revised down, but the emergency was far from over.

That’s the context for Friday’s 3.2% preliminary reading for November. Maybe it too will be revised lower later this month, but as it stands, it’s the highest since 2011.

To quote Fathers Merrin and Karras, “The power of Christ compels you! The power of Christ compels you!”

Unfortunately, year-ahead expectations rose too. After jumping by a full percentage point in October, that measure hit 4.4%, the highest in quite a while.

The uptick in the year-ahead measure for November shows the large increase between September and October “was no fluke,” as survey director Joanne Hsu put it Friday. Expectations for gas prices were the highest of 2023.

Increases in expectations on both horizons will only underscore the Fed’s concerns about false dawns — “head fakes,” as Powell put it on Thursday, while emphasizing that the Committee is “not confident” rates are high enough.

Still, it’s unlikely that anything short of a serious escalation in the actual, incoming price data would put a December rate hike back on the table. “The monetary policy implications from elevated household inflation expectations at this point in the cycle will translate into even higher-for-long as opposed to further rate hikes,” BMO’s Ian Lyngen remarked.

At 60.4, the headline sentiment index printed below all 50 estimates. The most pessimistic guess was 61.5. It was the fourth straight monthly decline.

Both the current conditions and expectations gauges fell meaningfully.

Hsu cited “growing concerns about the negative effects of high interest rates” as well as “ongoing wars in Gaza and Ukraine” for the deterioration in consumer moods.

Perhaps unsurprisingly given the resumption of student loan payments, the largest declines were observed among lower-income consumers and younger Americans.

Not everyone was depressed early this month, though. Sentiment improved for “the top tercile of stock holders,” who were apparently pleased with the rebound in equity prices.