July 15 (Reuters) - U.S. consumers tempered their inflation expectations in July alongside a sharp drop in gasoline prices over the past month, a potential signal the Federal Reserve's policy tightening is helping to prevent expectations for high inflation from becoming embedded.

The University of Michigan's preliminary survey of consumers for July showed consumers see inflation running at 2.8% over a five-year horizon, the lowest in a year and xsmb down from 3.1% in June.

Their one-year outlook for price increases moderated to 5.2% from 5.3% a month earlier and was the lowest since February.

The survey's elevated reading of consumer inflation expectations in June's preliminary survey was a factor in Fed officials' decision to lift interest rates last month by three-quarters of a percentage point rather than by just a half point.
(Reporting By Dan Burns; Editing by Chizu Nomiyama)