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