Donald Trump · Federal Reserve (FED) · Kevin Warsh · Iran · Fortune Technology
The Fed’s worst inflation fears may be coming true as consumers lose faith in long-term prices—and even Trump supporters doubt
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On the same day that Kevin Warsh was sworn in as the new Federal Reserve chairman, the University of Michigan’s consumer sentiment survey delivered a worrisome reading on inflation expectations and a major red flag for the central bank.
Key facts
- Consumers’ year-ahead views inched up to 4.8% this month from 4.7% last month, further exceeding the 3.4% reading seen in February before the war started
- In fact, Republicans’ long-term inflation expectations are now more than double what they were in February 2025, right after he returned to the White House
- Waller pointed out that the Fed came within a quarter percentage point of its 2% inflation goal last April, right before Trump imposed his tariffs
- On the same day that Kevin Warsh was sworn in as the new Federal Reserve chairman, the University of Michigan’s consumer sentiment survey delivered a worrisome reading on inflation expectations
Summary
In addition to the overall index falling for the third straight month to a fresh record low—even undercutting the levels seen during the 1970s oil crisis—inflation expectations rose as the Iran war and the continued closure of the Strait of Hormuz keep energy prices high. Consumers’ year-ahead views inched up to 4.8% this month from 4.7% last month, further exceeding the 3.4% reading seen in February before the war started. The near- and long-term expectations are back at rates seen late last year, when consumers were still reeling from President Donald Trump’s tariffs.