Michigan Inflation Expectations

MICH is the University of Michigan 1-Year Inflation Expectations measure, published monthly as part of the Surveys of Consumers. It captures household survey responses to "By about what percent do you expect prices to go up, on average, during the next 12 months?" The reading is a median value, which the Fed and academic researchers prefer over the mean because the distribution has long right tails.

Why it matters: MICH is the most-watched consumer-side inflation expectations gauge. While market-priced breakevens (T5YIE, T10YIE) capture institutional positioning, MICH captures actual household perceptions, which directly drive wage-bargaining, spending decisions, and saving behavior. The Fed cited MICH's June 2022 spike to 5.4% (the highest reading since 1981) as evidence that inflation expectations were at risk of de-anchoring, contributing to the aggressive 75bp hike pace through 2022.

MICH printed 4.7% in April 2026, the highest reading since 1981 and a meaningful gap above the market-priced T10YIE at 2.40%. This 230bp gap between consumer-survey and market-priced expectations is the largest in modern records, signaling that consumers see the inflation environment as much worse than the bond market does. Trump tariffs introduced 2025-2026 have driven a sharp rise in MICH because consumers perceive the tariff impact directly via grocery and electronics prices.

The Fed has historically discounted Michigan consumer survey moves when they diverged from market breakevens, treating the consumer side as more reactive to gasoline prices and headlines. The April 29 8-4 FOMC dissent reflects this debate: dovish minority sees market expectations well-anchored at 2.40%, hawkish majority sees consumer survey at 4.7% as a risk to sustained de-anchoring. Watch the MICH 5-10Y reading (longer horizon) for the structural-credibility signal.

Modern MICH 1Y range: 0.4% in 2009 (post-GFC deflation scare), 5.4% in June 2022 (post-COVID supply shock peak), 4.7% in April 2026. The 1980 peak was 10%+ during the second Volcker disinflation. The three drivers are gasoline prices (the largest single influence on consumer-survey responses), grocery inflation (most visible price exposure for households), and media coverage of inflation (which amplifies the level versus actual realized inflation).

First, the spread between MICH 1Y and T10YIE or T5YIE. Sustained gaps above 100bp signal expectations divergence; sub-50bp signals re-anchoring.

Second, MICH 5-10Y reading (longer-horizon expectations). The Fed weights this more heavily than the 1Y because it captures structural inflation perception.

Third, gasoline prices and the WTI-to-pump-price relationship. Rapid pump-price moves drive MICH 1Y by 50-100bp swings; stabilization helps re-anchor.