(Bloomberg) – Inflation in the United States has been rising at the fastest rate in decades. But ask consumers from all political parties where prices are heading in the near future, and you’ll get a whole different outlook.
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Republicans expect costs to rise 6.8% over the next year, more than double the 3% rate Democrats predicted, according to data from a University of Canada poll. Michigan released Thursday.
The discrepancy marks the largest gap on record since researchers began asking the question sporadically from 1980 and steadily from 2017. Respondents who identify as self-employed predict an annual rate of 4.8% , according to the results of the survey.
Over the next five years, Republicans expect prices to rise 4.4% on an annualized basis, compared to a projection of 2.3% among Democrats.
âWhile the age and income subgroups showed only small differences in expectations, Democrats predict much lower inflation rates than Republicans,â said Richard Curtin, poll director, in a press release. “Three times as many Republicans as Democrats cited the negative impact of inflation on their finances.”
Consumer prices rose last month to their highest level since 1982 as demand outstripped supply due to labor shortages and supply chain disruptions. The Federal Reserve announced last week that it would speed up the removal of monetary support to the economy to control inflation, which has eroded Americans’ purchasing power and derailed the Biden administration’s legislative agenda.
Those responsible for monetary policy are attentive to so-called inflation expectations because they tend to be self-fulfilling: if households expect prices to rise, they risk pushing up their spending. At the same time, workers will push for higher wages, forcing companies to charge more for products in a recurring cycle.
But the glaring political disparity underscores polarized attitudes about the inflation outlook and makes the data difficult to interpret.
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