Consumer expectations for inflation in the coming months and years appear to be falling as a result of the Federal Reserve’s aggressive interest rate hikes.

The Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations for July, released on Monday, revealed “substantial declines” in short, medium, and long-term inflation expectations. One-year inflation expectations fell from 6.8 percent to 6.2 percent, while three-year inflation expectations fell from 3.6 percent to 3.2 percent.

While those figures are still well above the Fed’s target of sustained 2 percent inflation, the declines are noteworthy because they show that the central bank is succeeding in lowering consumer expectations of future price increases.

Inflation expectations for the next five years fell from 2.8 percent in June to 2.3 percent in July. The July figures represent the most significant drop in inflation expectations since they began to rise last year.

Nonetheless, headline inflation is at its highest level in four decades. Inflation, as measured by the consumer price index, was 9.1 percent in the 12 months ending in June.

Consumers are most affected by increases in food and energy prices. Food prices increased by 10.4 percent in the 12 months ending in June, while energy prices increased by a painful 41.6 percent.

The average price of a gallon of gas in the United States is now $4.06, up 87 cents from a year ago. It is worth noting that gas prices have begun to fall in recent months after peaking at around $5 per gallon.

The much-anticipated July CPI figures will be released on Wednesday. They are expected to show that inflation has slowed, with the consensus expecting inflation to be 8.7 percent. The falling price of gasoline will almost certainly play a significant role in lowering the headline figure.

The Fed has conducted a series of increasingly aggressive rate hikes in response to months of high inflation that has plagued the country for over a year.

The Federal Open Market Committee announced last month, following a two-day meeting, that it would raise its interest rate target by three-quarters of a percentage point. The central bank typically raises rates by a quarter of a percentage point, so the move amounted to three simultaneous rate hikes and reflects officials’ desperation to bring down prices.

This came after the Fed raised rates by the same amount in June and twice more in March and May. Many economists believe the Fed waited too long to tighten monetary policy after the pandemic had passed.

The Fed’s action is intended to slow spending and eventually drive down prices, but the trade-off may be that the economy enters a recession. There are signs that the United States is on the verge of, or has already entered, a recession.

According to a preliminary estimate from the Bureau of Economic Analysis, the United States’ GDP fell at an annualized rate of 0.9 percent in the second quarter. The figures come on the heels of a 1.6 percent decline in GDP growth in the first quarter. Economists have traditionally defined a recession as two quarters of negative GDP growth.

The National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” according to the government and economists.

The consistently out-performing labor market is one major factor supporting the notion that the United States is not in a recession. During a recession, job growth typically slows and the unemployment rate rises.

The economy defied expectations in July, adding 528,000 jobs, an encouraging sign of the labor market’s resiliency, according to data released on Friday. Unemployment unexpectedly fell to 3.5 percent, matching the ultralow level it had before the pandemic.

The positive jobs report will give the Fed more confidence in raising rates aggressively because it demonstrates that the economy has been able to absorb some of the blows from the hikes better than expected.

Some economists believe the central bank will conduct another three-quarters hike after its September meeting, bringing the total number of conventional hikes to nine in just four months.