Affluent Americans are driving US economy and likely delaying need for Fed rate cuts

Once or twice a year, she visits her two adult children in different states. She's planning multiple other trips, including to a science fiction convention in Scotland and a Disney cruise soon after that, along with a trip next year to neolithic sites in Great Britain.

As recently as March, the Fed's policymakers had projected that they would cut their benchmark rate three times this year. Since then, though, inflation measures have remained uncomfortably high, partly a consequence of. Chair Jerome Powell made clear recently that the Fed isn't confident enough that inflation is sustainably easing to cut rates.

All told, Americans’ wealth has ballooned from $98 trillion at the end of 2018 to $147 trillion five years later. Adjusting for inflation, the gains are less dramatic, but still substantial. “The baby boomers are the richest retiring generation we’ve ever had,” said Edward Yardeni, president of Yardeni Research. “Not everybody is well-off, but we've never had a retiring generation with this much wealth. That’s one of the major reasons why the economy is strong."

Harris, for one, sees this divide in her own family: Her home and car are paid off, and higher interest rates have had little effect on her finances. She recently visited a home in her neighborhood that she was surprised to see priced at $500,000. She bought hers, which she thinks could fetch a higher price, for $162,000 in 1991.

Economists calculate that while the wealth effect generally has a relatively modest effect on spending, it may be larger now. That's because retirement-age Americans, who are more likely to spend out of their wealth, constitute a larger proportion of the nation: Americans ages 65 and over make up about 17% of the population, up from 13% in 2010. And people with stock holdings can now easily access their account balances online, increasing their awareness of increases in their net worth.

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