Fed Official Warns of Economic Risks from Affordability Crisis

Mounting problems for poorer Americans are exposing the U.S. economy to downturn risks, a top Federal Reserve official warned.This highlights the “balancing act” facing central bankers as they consider another interest rate cut in December.

John Williams, president of the New York Fed, saeid data and conversations with community leaders show many lower-income households are facing an affordability crisis.

“ThereS quite a bit of evidence… that lower and moderate-income households are facing constraints from an affordability point of view,” Williams told the Financial Times. “It’s about the cost of living, housing costs, and many families living month to month.”

Meanwhile,wealthier Americans are benefiting from a stock market that’s “booming near all-time highs.”

With the U.S. jobs market cooling, Williams signaled that the “disaggregated” behavior of U.S. households could influence whether he thinks the Fed should cut borrowing costs in December-a vote he described as a “balancing act.”

While U.S. growth has been more resilient than many expected and inflation remains above the Fed’s 2 percent goal, the hardship felt by vulnerable households due to the high cost of living means the U.S.economy could be derailed.

“Something could happen that cuts into confidence, or consumer spending growth we’re seeing at the aggregate level may not be as robust, if you will, given that a lot of folks are really, again, living month to month,” said williams, who is also vice-chair of the rate-setting Federal Open Market Committee.

Fed officials-including chair Jay Powell and influential governor Christopher Waller-have started focusing more on how a labour market lacking “a lot of strength and momentum” could affect the economic prospects of everyday Americans.

Powell and Waller have noted strong consumer spending is being disproportionately driven by the