Consumer inflation expectations have fallen for the second month in a row — per the latest Federal Reserve Bank of New York survey:

• In one year, consumers expect inflation to be 6.2% — down from the 6.8% expected the month before.
• In three years, consumers expect inflation to be 3.2% — down from the 3.6% expected the month before.

The survey also showed inflation expectations of food and gasoline prices slowing — likely a result of the recent drop in oil prices.

Why this matters: The Fed is raising interest rates to tackle high inflation — rocking the markets in 2022. Investors are now waiting for the Fed to slow or stop interest rate hikes before jumping back into risky assets — one condition for a market recovery.

But don’t expect one inflation report to change the Fed’s course, and here’s why…

The data that gives the Fed more reason to increase rates…

… A red hot jobs market. Last Friday’s July job report showed a:

• 528,000 rise in non-farm payrolls — double economist’s forecasts.
• 3.5% unemployment rate — the lowest since 1969 and never heard of in a “recession.”

Despite all the tech company layoff headlines — hiring remains strong with a lack of workers in many industries.

The Fed is worried rising interest rates will send the economy into a recession — but the job data gives them the green light to keep rising.

“This [job data] gives the Fed additional room to tighten, even if it raises the probability of pushing the economy into recession,” per Plante Moran Financial Advisors’ Chief Investment Officer (CNBC).

Important: July’s inflation report is being released tomorrow at 8:30 AM — a major event that could shake the markets.