Companies across the United States say they expect inflation to remain subdued this year, according to surveys from Federal Reserve banks that show business price expectations falling to their lowest levels since before the 2022 inflation surge.
The Cleveland Fed’s Survey of Firms’ Inflation Expectations, released Tuesday, found businesses expect general inflation of just 3.1 percent over the next 12 months, down from a peak of 3.9 percent last year. During President Joe Biden’s single term in office, the year-ahead expectation figure rose above seven percent.
Meanwhile, the Atlanta Fed’s Business Inflation Expectations survey shows companies predict their own unit costs will rise by only 2.0 percent in the year ahead, falling from 2.8 percent earlier in 2025.
Both measures are approaching the levels seen before inflation began accelerating in 2022, suggesting businesses believe the worst of the price pressures may be behind them.
The survey findings align with corporate behavior, as major companies increasingly prioritize affordability over margin expansion. PepsiCo Inc., the $29.3 billion food and beverage giant, announced this month it would cut prices on popular snacks including Cheetos, Doritos and Lay’s after “extensive consumer feedback around affordability limitations.”
“There are consumers out there that are looking for us to give them excuses to come into the category,” PepsiCo Chief Executive Ramon Laguarta said, highlighting how affordability has become “the biggest friction” for low- and middle-income consumers.
The shift represents a marked change from recent years, when companies routinely passed higher input costs to consumers through price increases. PepsiCo pushed up prices by double-digit percentages in both 2022 and 2023, but has moderated increases as consumer resistance mounted.
Federal Reserve data shows this dynamic is playing out broadly across the economy. The Cleveland Fed survey, which has tracked business expectations since 2018, found not only that inflation expectations are declining but that uncertainty around those expectations has also diminished significantly.
The standard deviation of responses in the Cleveland survey fell to just 0.7 percentage points in the first quarter of 2026, the lowest in the recent data series, suggesting businesses are increasingly confident that price pressures will remain manageable.
Companies are adopting various strategies to maintain market share while managing cost pressures. Some are absorbing higher input costs through reduced margins rather than passing them to consumers, while others are redesigning products or packaging to maintain affordability.
The Atlanta Fed survey, which captures expectations for firms’ own unit costs rather than general inflation, has shown a particularly sharp decline in recent months. The 2.0 percent expectation for the year ahead compares to readings above 5 percent during the peak inflation period of 2022-2023.
This return to more moderate expectations reflects both easing supply chain pressures and companies’ recognition that consumer demand has become increasingly price-sensitive. Volume declines at major consumer goods companies have prompted a shift toward strategies focused on accessibility rather than premium pricing.
The Fed surveys provide a systematic view of business sentiment that extends beyond individual company announcements. Both the Cleveland and Atlanta Fed polls survey hundreds of firms across diverse industries, providing a broader picture of inflation expectations than individual corporate earnings calls or investor presentations.
For policymakers, the declining business expectations may provide additional evidence that inflation pressures are moderating, as companies face consumer resistance to higher prices and competitive pressures to maintain affordability.
The surveys also undercut the idea that the Trump administration’s tariffs will push up prices this year. Although many economists expected tariffs to raise consumer prices, in the 12 months through January, the index for core consumer goods—the category most exposed to inflation—rose just 1.1 percent. A recent study of tariffs found that historically, rising import duties are associated with falling inflation.
Hoover Institution economist John Cochrane has argued that stronger fiscal capacity—higher expected revenues relative to spending—can reduce inflation by strengthening the government’s fiscal backing. Trump’s tariffs have brought in hundreds of billions of dollars and, according to projections based on current policy, are expected to average roughly the high hundreds of billions per year over the coming decade (about four trillion dollars in gross duties from 2026–2036). In that framework, the fiscal improvement from Trump’s tariffs points toward lower inflation than would otherwise prevail—and, over time, a lower overall price level than the no-tariff baseline.
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