Federal Reserve Acknowledges Widening Economic Inequality in US

Senior officials at the U.S. Federal Reserve have acknowledged that monetary policy decisions made in recent years have contributed to widening economic inequality in the United States, an imbalance the central bank says it cannot quickly or easily resolve.

During the COVID-19 pandemic, the Federal Reserve slashed interest rates to near zero in an aggressive effort to support a struggling economy and protect jobs. While the move helped stabilize financial markets, it disproportionately benefited wealthier Americans, many of whom were better positioned to invest in stocks and real estate during the period of ultra-cheap borrowing.

Millions of Americans, particularly high-income households, locked in historically low mortgage rates during that time. According to data from Fannie Mae, around 20% of U.S. homeowners still hold mortgages with interest rates below 3%, allowing them to enjoy lower monthly payments while steadily accumulating wealth through rising home values.

Today, borrowing costs are significantly higher, creating a sharp divide between those who secured cheap credit before rates rose and those now shut out of homeownership or forced to pay far more to borrow.

At the same time, U.S. financial markets continue to deliver strong gains. The stock market is on track to close another year of robust performance, driven largely by sustained investment in artificial intelligence, marking an extraordinary three-year bull market.

However, these gains have not been evenly shared. Lower-income households, who are more likely to rent and far less likely to own stocks, have seen limited benefit from the market’s rise. Data from the Federal Reserve Bank of Atlanta (2025) shows wage growth for lower-income workers has slowed relative to higher earners over the past five years.

Public concern over the cost of living has intensified, particularly among low-income Americans. Surveys indicate affordability has become a dominant economic and political issue, even as some political leaders, including U.S. President Donald Trump, have downplayed these concerns in recent remarks.

Federal Reserve officials stress that the growing wealth gap was not an intended outcome of monetary policy. In 2020, the central bank’s mandate was to achieve maximum employment and price stability amid an unprecedented global crisis.

The Fed kept interest rates at exceptionally low levels until March 2022, when it began raising them aggressively to combat surging inflation. Homeowners who locked in low rates before that shift continue to benefit, while others face higher housing and borrowing costs.

While acknowledging its role in shaping economic outcomes, the Federal Reserve has made clear that monetary policy alone cannot repair structural inequality, underscoring a challenge that extends beyond interest rates and into broader fiscal and social policy decisions.