Jerome Powell points at a worrying trend impacting American households — despite strong US GDP
The US GDP might have grown at a higher rate than many expected recently, but that does not mean millions are not struggling with affordability. For low and middle-income households, rising prices across several sectors have forced them to change their shopping habits in order to save money. As far as Fed Chair Jerome Powell is concerned, this economization is a direct result of stubborn inflation that has squeezed the budgets of several households.
The Fed Chair left the rates unchanged after dropping them by 25 points over the last three of its meetings in 2025. Powell spoke about how high-income households and individuals have been driving American consumption of late, as they own real estate, stocks, and securities, all of which have gone up in value. However, the story is a lot different when it comes to Americans on the other end of the financial spectrum.
"We also know that for some time now, for a year or more, we've been hearing from retailers, for example, that serve lower-income customers, whether it be food or the big box stores or any of that – they're saying the same thing, which is our consumers are looking to economize," Powell said as per a Fox News report. "They're trading down from brands, and they're buying less, and it's changing their buying habits, and that kind of thing. That's a reality of what we're seeing. They're still consuming, but they're feeling it in a different way.”
The Federal Reserve Chairman claimed that he has frequently heard concerns about affordability, both from individuals and small businesses that are struggling to stay afloat in this economy. Powell believes that getting inflation down to 2%, which was the Fed’s target, would be the best way to address these concerns. However, the current rate of inflation is considerably higher than that.
Powell believes that the rate of inflation reached 2.9% in December based on the latest consumer price index (CPI) inflation data. "I would say more broadly on affordability, we have a vast network through the Reserve Banks and also through the Board of Governors where we talk to small and large businesses and households," he said.
"So we do hear a lot about affordability, and we take that very seriously, and we take it to heart, because one of our jobs is price stability. The best thing we can do for people who are feeling that squeeze is to keep inflation under control, and, frankly, to finish the job of getting inflation back down to 2%."
He did not shy away from pinning the blame on the Trump administration's tariff policies for the high inflation rate, either. "These elevated readings largely reflect inflation in the goods sector, which has been boosted by the effects of tariffs. In contrast, disinflation appears to be continuing in the services sector," Powell noted.
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