The poor face a double: inflation now and job loss later.

High-income households accumulated savings and wealth during the early stages of the pandemic as they stayed home and their stocks, homes and other assets appreciated in value, report Jeanna Smialek and Ben Casselman of the New York Times. Between those stocks and solid wage growth, many have been able to keep spending even as costs rise.

But data and anecdotes suggest that lower-income households, despite the resilience of the labor market, are struggling more deeply against inflation.

This divergence poses a challenge to the Federal Reserve, which hopes that higher interest rates will slow consumer spending and ease price pressure across the economy. Already there are signs that the poorest families reduce. If wealthier families don’t pull back as much — if they continue to go on vacations, dine out, and buy new cars and second homes — many prices could continue to rise. The Fed may need to raise interest rates even further to control inflation, which could lead to a steeper slowdown.

Leave a Comment