This article originally appeared in the Financial Post. Below is an excerpt from the article.
By Philip Cross, October 10, 2025
In a recent Pew Research Center poll, 63 per cent of Americans described inflation as a very big problem, compared with only 25 per cent who said that about unemployment. The public’s preoccupation with higher prices comes at a time when the Federal Reserve Board is cutting interest rates despite inflation having exceeded its two per cent target in each of the past four years. Two recent studies investigate why average people have always been more concerned about inflation than many economists are.
In their 2024 paper, “People’s understanding of inflation,” economists Alberto Binetti, Francesco Nuzzi and Stefanie Stantcheva report that survey “respondents categorized inflation’s effects as unambiguously negative, saying it was worse than unemployment and ranking it as a more important policy priority than health care, growth and unemployment.” The public does not believe a trade-off exists between inflation and unemployment; in fact, half of respondents supported lower interest rates to fight inflation. Most economists would argue lower rates encourage inflation.
It is easy to see why people resent price hikes. In a separate paper that asked “Why do we dislike inflation?,” Harvard’s Stantcheva concluded the main reason is “the widespread belief that it diminishes their buying power.” Most people see higher wages as a reward for hard work, not as partial compensation for higher prices. People naively believe that in the absence of higher prices their wages would continue to rise, boosting their real incomes.
***TO READ THE FULL ARTICLE, VISIT THE FINANCIAL POST HERE***
Philip Cross is a senior fellow at the Macdonald-Laurier Institute.
