The University of Michigan Surveys of Consumers has found that American consumers expect inflation to moderate considerably in the next year, with their one-year inflation outlook hitting its lowest reading in 18 months this December.

The survey found that the one-year inflation outlook, released with its bi-monthly survey of overall consumer sentiment, had dropped to 4.4% this month, a drop compared to the November reading of 4.9%, and the preliminary reading two weeks ago of 4.6%.

It marked a 0.5% drop in near term inflation expectations since November, which was the largest drop since September of 2020, and the lowest reading since June of 2021.

The five year outlook also dropped to 2.9%, from 3.0% both in November, and earlier in this month.

In other news, the Commerce Department reported Friday that the Personal Consumption Expenditures price index, or PCE, rose 5.5% in November from a year earlier. Prices rose just 0.1% from October.

Core PCE, excluding volatile food and energy prices, rose 4.7% annually and 0.2% monthly, which matched expectations of economists polled by Refinitiv.

Both PCE readings hit their lowest levels since October 2021. This data adds to declines in other inflation measures, such as the Consumer Price Index and Producer Price Index.

Friday’s report also showed spending rose 0.1% in November, compared to 0.8% the month prior. Personal income rose 0.4% in November, down from 0.7% in October.

Gus Faucher, chief economist for PNC Financial Services, said in a statement, “The economy is moving in the right direction from the Federal Reserve’s perspective at the end of 2022, but not quickly enough. Higher interest rates are weighing on consumer spending, particularly for durable goods, and inflation is slowing.”

He added, “The Federal Open Market Committee will continue to increase the fed funds rate in early 2023 until it becomes more apparent that the job market is cooling, and wage growth and services inflation are slowing to more sustainable paces.”