Inflation is hurting lower-income Americans. They're being more cautious with their spending due to higher expenses and debt servicing. On the other hand, affluent consumers continue to spend, leading to a "K-shaped consumer" pattern. Despite high employment, the pressure of rising living costs is taking its toll on lower-income Americans.
The Federal Reserve kept interest rates the same this week, which means borrowing costs like those for credit cards, mortgages, and auto loans will not get any cheaper for consumers. This move crushes hopes that the Fed might start lowering rates this year, which could have relieved the financial strain on households. Instead, only one rate cut is expected later in the year, and even that may not provide much relief since inflation remains high and interest rates are expected to stay at current levels for some time.
The Federal Reserve has kept interest rates the same, disappointing many who hoped for cuts. As a result, borrowing costs for things like mortgages, credit cards, and student loans will remain high for now. While inflation has eased slightly, it's still a concern, and the Fed wants to make sure it's under control before lowering rates. Once rates do start to come down, borrowing costs may gradually decrease, but they're unlikely to drop significantly.
