Fed’s Williams warns strain on lower-income Americans could undercut growth

Rob Kim

Federal Reserve Bank of New York President John Williams cautioned that financial stress among lower- and middle-income households could erode the U.S. economy’s strength, even as affluent Americans continue to benefit from surging equity markets, according to an interview with the Financial Times.

Williams said the Fed’s December interest rate decision will be “really a balancing act,” noting that while “inflation is high, and it’s not showing signs of coming down right now,” the broader economy “is showing some resilience.”

Still, he said affordability pressures are squeezing many Americans, especially when it comes to housing and everyday expenses. There’s growing evidence, he said, “that lower and moderate-income households are facing some constraints from an affordability point of view.”

That dynamic, Williams added, could weigh on consumer sentiment and spending, “given that a lot of folks are really, again, living month to month.”

He rejected suggestions to alter how the Fed sets its benchmark interest rate and said investor optimism about AI-driven productivity growth is helping support financial markets. However, he also acknowledged the risk that enthusiasm could lead to overinvestment and potential market imbalances, the FT reported.

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