The mounting problems facing poorer Americans are leaving the world\u2019s most important economy exposed to risks of a downturn, a top Federal Reserve official has warned, highlighting the \u201cbalancing act\u201d facing central bankers as they consider whether to cut interest rates again in December.<\/p>\n
John Williams, president of the New York Fed, said data and conversations with community leaders highlighted that many poorer households were facing an affordability crisis. <\/p>\n
\u201cThere is quite a bit of evidence\u2009.\u2009.\u2009. that lower and moderate-income households are facing some constraints from an affordability point of view,\u201d Williams told the Financial Times. \u201cFrom the cost of living, the housing costs and basically many families living month to month.\u201d <\/p>\n
Meanwhile, wealthier Americans were benefiting from the stock market \u201cbooming near all-time highs\u201d.<\/p>\n
With the US jobs market cooling, Williams signalled that what he dubbed the \u201cdisaggregated\u201d behaviour of US households could be a factor in determining whether or not he thinks the Fed<\/a> should cut borrowing costs in December \u2014 a vote he described as a \u201cbalancing act\u201d.<\/p>\n While US growth overall had proven much more resilient than many economists had anticipated and inflation<\/a> remained above the Fed\u2019s 2 per cent goal, the pain felt by more vulnerable households because of the high cost of living meant the US economy<\/a> could be knocked off course. <\/p>\n \u201cSomething could happen that cuts into confidence, or consumer spending growth that we\u2019re seeing at the aggregate level may not be as robust, if you will, as it would be otherwise, given that a lot of folks are really, again, living month to month,\u201d said Williams, who is also vice-chair of the rate-setting Federal Open Market Committee. <\/p>\n Fed officials \u2014 including chair Jay Powell and influential governor Christopher Waller \u2014 have started to focus more on how a labour market which Williams described as lacking \u201ca lot of strength and momentum\u201d could affect the economic prospects of normal Americans. <\/p>\n Powell and Waller have noted strong consumer spending is being disproportionately driven by the highest earners. <\/p>\n The pain felt by poorer and middle-income American households is also affecting the political climate, propelling Zohran Mamdani to victory in the race for New York mayor, where he ran on a platform of lowering living costs. <\/p>\n The poor showing of candidates backed by US President Donald Trump<\/a> in the city\u2019s mayoral race and votes for the governorships of Virginia and New Jersey has also been linked to a crisis in affordability similar to that which plagued Joe Biden\u2019s presidency. <\/p>\n The Fed has cut borrowing costs by a quarter-point at each of its past two policy votes because of evidence the US labour market was weakening. <\/p>\n Investors expected another move next month \u2014 up until late October when Powell said further cuts were far from a \u201cforegone conclusion\u201d. <\/p>\n \u201cIt\u2019s really a balancing act,\u201d the New York Fed president said in reference to the December vote. \u201cThese facts are fundamentally true\u00a0\u2014 inflation is high, and it\u2019s not showing signs of coming down right now. And at the same time, the economy is showing some resilience.\u201d <\/p>\n While the US labour market was still \u201cgradually cooling\u201d, it was \u201cnot shifting more dramatically\u201d. Unlike earlier in the year, \u201cno one\u2019s really talking about recession\u201d, he said. <\/p>\n