Americans’ Partisan Divide Over Inflation Widens to Biggest Ever

(Bloomberg) -- Inflation in the U.S. has been rising at the fastest pace in decades. But ask consumers across political parties where prices are headed in the near future, and you’ll get entirely different outlooks.

Republicans expect costs will increase 6.8% over the next year, more than double the 3% rate predicted by Democrats, according to survey data from the University of Michigan released Thursday.

The divergence marks the largest gap on record since researchers began asking the question along party lines sporadically starting in 1980 and on a consistent basis beginning in 2017. Respondents identifying as independent anticipate a year-ahead rate of 4.8%, the survey results showed.

Over the next five years, Republicans expect prices will rise an annualized 4.4% compared with a 2.3% projection among Democrats.

“While age and income subgroups showed only small differences in expectations, Democrats anticipate much lower inflation rates than Republicans,” Richard Curtin, director of the survey, said in a statement. “Three times as many Republicans as Democrats cited the negative impact on their finances from inflation.”

Consumer prices jumped last month by the most since 1982 as demand outstrips supply amid labor shortages and shipping disruptions. The Federal Reserve announced last week it would accelerate its removal of monetary support for the economy in order to tame inflation, which has eroded Americans’ purchasing power and derailed the Biden administration’s legislative agenda.

Policy makers pay attention to so-called inflation expectations because they tend to be self-fulfilling: if households anticipate a run-up in prices, there’s a risk they’ll pull forward their spending. At the same time, workers will push for higher pay, in turn compelling businesses to charge more for products in a recurring cycle. 

But the sharp political disparity underscores polarizing attitudes about the inflation outlook and makes the data hard to interpret. 

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