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Near-Term Inflation Expectations Surge on Democrat Tariff Fears, Consumer Sentiment Drops

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mystery-ak:
Near-Term Inflation Expectations Surge on Democrat Tariff Fears, Consumer Sentiment Drops

John Carney 7 Feb 2025

The University of Michigan’s gauge of consumer expectations for inflation over the next 12 months surged higher in early February, indicating that American households think inflation will go much higher over the coming year.

Consumers expect prices to rise 4.3 percent, a big increase from 3.3 percent in January. This is the highest expected inflation since November 2023 and only the fifth time in 14 years that the University of Michigan’s survey recorded a gain of one percent or more in a single month.

The gain was driven by increased expectations of rising prices among Democrats. Republican consumers expect zero inflation over the next year, slightly lower than a month ago. Independents expect a 3.7 percent increase, more than they did a month ago and up from around three percent at the end of 2024. Democrats, who expected around 2.5 percent inflation before the November election, now say they expect prices to rise 5.1 percent this year.

Longer-run inflation expectations, a measure of average expected price changes over the next five years, ticked up to 3.3 percent in February, up from 3.2 percent in the prior month. This too was largely driven by surging Democrat fears of inflation. The average expected inflation among Democrats rose to 4.2 percent, up from less than four percent a month ago and less than three percent prior to the election. Among independents, the longer-run expectation was unchanged. Among Republicans, the longer-run expected rate of inflation fell to 1.5 percent.

The partisan gaps in inflation expectations are now larger than they have been any time in the last four years.

The Federal Reserve watches inflation expectations closely. Many economists and Fed officials believe that a rise in inflation expectations can trigger a rise in actual inflation, although the evidence for this is mixed.

more
https://www.breitbart.com/economy/2025/02/07/near-term-inflation-expectations-surge-on-democrat-tariff-fears-consumer-sentiment-drops/

DB:
What tariffs?

Weird Tolkienish Figure:
Tariffs IMO will not in the long run prove to be successful. They should be used as punitive agents only.

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