It’s a good thing 2025 Jerome Powell doesn’t put any more weight on the University of Michigan inflation expectations series than any other input into the Fed’s framework when it comes to assessing households’ outlook on consumer prices.

Because man, oh man. If those series were as important to 2025 Powell as they were to 2022 Powell, then he might be sounding out his colleagues for rate hikes right about now.

I’m referring, of course, to Powell’s convenient flip-flop on the Michigan gauges. In June of 2022, an overshoot on the five- to 10-year measure was widely seen as sealing the deal on the Fed’s decision to up the rate-hike ante to 75bps amid a series of eight-handle CPI prints.

Fast forward to March of 2025 and Powell downplayed a print far higher than the offending overshoot from mid-2022, calling the Michigan poll just one among many indicators the Fed takes into consideration. He changed his tune (however subtly) in subsequent remarks this year, as the same medium-term expectations measure accelerated.

On Friday, in the preliminary Michigan release covering May, five- to 10-year inflation expectations hit 4.6%, a new “since 1991” high. That series is now up a harrowing 1.5ppt since the election. Note that the print which spooked the Fed in June of 2022 was 3.3%.

The figure above also shows the year-ahead (i.e., 12-month) inflation expectations series from the Michigan report. It printed — and try not to gasp — 7.3% in Friday’s update.

Although the chart does the talking for me, I feel like I should emphasize: This is wholly untenable. Forget whether people like me are overstating the case when it comes to how much emphasis the Fed actually put on these metrics in 2022. If the Committee cares about these measures at all, then this is a five-alarm blaze.

Without mincing words, these are the worst inflation expectations readings in modern history on one of the country’s most respected consumer surveys, and it’s not close. The Fed can’t look the other way on this, even if most of the increase proves to be fleeting.

I’ll be the first to concede that the media’s a (big?) part of the problem. There’s only so many times you can hear that tariffs cause inflation before you start to believe it, and that’s going to show up in the polls.

That said, remember the first rule of inflation: It can be self-fulfilling through the expectations channel. That’s why the Fed emphasizes at every opportunity that amid the trade war, one of the Committee’s first priorities is to — and I’m quoting Powell here — “keep longer-term inflation expectations well anchored” so as to ensure “a one-time increase in the price level does not become an ongoing inflation problem.”

To briefly recap the dynamics, if you think stuff’s going to cost more tomorrow, you’ll buy it today if you can. At scale, demand pull-forward pushes up prices. In the eyes of spooked consumers, rising prices validate concerns about inflation, prompting still more pull-forward and front-running, and around we go.

As the figure shows, there’s no precedent — nor anything that remotely resembles precedent — for the recent surge in the longer run Michigan series.

To be clear, the self-fulfilling dynamic described above’s never going to be as acute in America as it is in emerging markets, let alone failed states where there’s little to no faith in the currency. Still, if you’re the Fed you can’t just sit around and ignore what households are saying on the excuse that market-based measures of inflation expectations are “well-anchored.”

Powell and co. will now hope (pray) that these measures moderate in the final read on Michigan sentiment for May and, more importantly, in the preliminary snapshot for June, which is due the Friday before next month’s FOMC meeting.

Oh, one more thing: Michigan survey director Joanne Hsu noted that the increase in long run inflation expectations this month “reflect[ed] a particularly large jump among Republicans.”