US consumer sentiment in December reached its highest level in eight months, with Americans feeling optimistic about the economy. However, a closer look at the University of Michigan’s consumer sentiment survey reveals a sharp partisan divide in views on inflation expectations.
According to the survey, Republicans are extremely bullish on inflation, expecting it to fall to 1.3% over the next year. In contrast, Democrats expect inflation to rise to 3.2%, while Independents see prices increasing to 2.9%. The Federal Reserve has set a target of 2% inflation, but some officials have acknowledged that progress toward this goal has stalled.
The survey also shows that economic sentiment among Republicans jumped to an 81.6 reading in December, the highest level since November 2020. Democrats’ sentiment, on the other hand, declined to a 70.9 reading, its lowest level since September 2020. The partisan divide in views on inflation expectations has significant implications for the Federal Reserve’s interest rate decisions.
Inflation expectations rose to 2.9% in December, marking a six-month high and largely driven by differences between how Democrats and Republicans view the incoming administration’s economic policies. This uptick in inflation expectations comes as some Fed officials have expressed concerns that progress toward their 2% target has stalled.
Source: https://finance.yahoo.com/news/economic-optimism-jumps-for-republicans-sinks-for-democrats-after-trumps-election-win-171149795.html