The Fed’s worst inflation fears may be coming true as consumers lose faith in long-term prices—and even Trump supporters doubt he can bring relief

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. 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 just before the war started. But more troubling was that long-run inflation expectations jumped to 3.9% in May from 3.5% in April, well above 2024’s range of 2.8% to 3.2%. 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. But unlike his trade war, he can’t unilaterally decide to end the Iran war and bring oil prices back down. And while consumer surveys are notorious for being sharply divided along political lines, the surge in extended views was driven by independents and Republicans, meaning Trump’s own supporters doubt he can lower inflation soon. 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. “Critically, consumers appear worried that inflation will increase and proliferate beyond fuel prices, even in the long run,” Surveys of Consumers Director Joanne Hsu said in the University of Michigan report. Such a shift in views can perpetuate more inflation, especially if workers demand higher pay increases to offset expectations of more price hikes. From a central banker’s point of view, this raises fears of a nightmare scenario where persistently higher inflation causes consu