The Federal Reserve has cut interest rates for the first time this year, providing some relief to households struggling with debt. However, economists warn that this move may not be enough to address the growing economic inequality in the US.
A “K-shaped” economy, where high-wealth Americans continue to experience gains while middle- and lower-income households face increased strain, is worsening due to widening income gaps. The top 20% of earners now account for over 63% of spending, leaving those in lower-income brackets behind.
This trend is causing concern among economists, who believe that a significant correction in stock prices could trigger a recession if the wealthy turn cautious with their spending. Meanwhile, lower- and middle-income households are feeling the pinch, with credit scores dropping at an alarming rate.
The Fed’s decision may bring some relief to certain households, but it’s unlikely to address the underlying issues of economic inequality. As one economist noted, “It’s just a little bit less of a struggle.” The economy remains shakily and inflation is heating up, making it essential for policymakers to tackle this pressing issue.
The widening spending gap has significant implications, with lower- and middle-income households forced to cut back on discretionary spending. For some, like Minnesota resident Calyssa Hall, money is tight, and she’s struggling to bounce back from the pandemic. The rising cost of living is a major concern for her, as well as others.
The Fed’s decision may be seen as a small step towards addressing economic inequality, but it’s essential to recognize that this issue goes beyond monetary policy alone. Policymakers must work together to address the underlying causes of economic inequality and provide relief to those struggling.
Source: https://edition.cnn.com/2025/09/18/business/us-k-shaped-economy-spending