Partisan Bias in Inflation Expectations: Evidence from the 2024 US Election

Abstract

How does partisanship affect inflation expectations? While most research focuses on how inflation impacts political approval and voter behavior, we analyze the political roots of inflation expectations. We argue that elections serve as key moments when citizens update their economic outlook based on anticipated policy changes, and that partisanship influences these re-evaluations. Using a two-wave panel survey conducted before and after the 2024 U.S. Presidential Election, we show that partisan alignment strongly shapes inflation expectations. Democrats reported heightened inflation expectations, anticipating inflationary policies under a Trump administration, while Republicans expected inflation to fall. These shifts reflect partisan interpretations of economic policy rather than objective forecasts. We also analyze the characteristics of those who are more likely to update inflation expectations and in what direction. Importantly, we verify that individuals with strong partisan attitudes exhibit less anchored inflation expectations. Our findings have implications beyond the case under  analysis. From a policy perspective, our results underscore the challenges central banks face in anchoring inflation expectations in an era of political polarization, where economic perceptions differ sharply across partisanship lines.

Keywords: Inflation expectations, Survey data, Partisanship, United States, Polarization

JEL Classification: E31, E71, D84