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One of the requirements the Federal Reserve has mandated before raising interest rates is that inflation rise to at least 2%—but central bankers may have a demographic hurdle to overcome: Millennials' inflation expectations.
The 19- to 35-year-olds aren’t expecting prices to rise any time soon, according to Personal Consumption Expenditure stats. Americans who started working in 2000 and onward are used to a mundane inflation climate, with PCE price inflation averaging about 1.7%, Bloomberg reports.
The PCE rate hasn’t exceeded 2.5% since the start of the millennium—compare that to the average 4.3% inflation rates that the majority of Baby Boomers experienced in their prime working years and it's apparent why Millennials continue to report lower inflation rate expectations. To succeed in its plan to raise inflation expectations for the generation, economists are encouraging the Fed to target forces that drive deflation for Millennials—technology and subsidized education and healthcare. [Bloomberg]
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