The Fed should rely on unprecedented rates to save the economy, according to an expert

Galloping inflation, unpredictable interest rates, lurking unemployment and declining purchasing power: this is the economic menu awaiting households at the start of the year. While Americans scrutinize every price change with palpable anxiety, Fed experts debate what to do next. In the background, a robust job market and a newly elected president: the cocktail is explosive.

Inflation: a sword of Damocles hanging over consumers

The specter of inflation continues to hang over American households. According to a WalletHub survey56% of Americans name it as their number one financial concern for 2025. Not surprising when the inflation rate, measured by the index of personal consumption expenditure excluding food and energy, has remained stuck between 2.6% and 2.8% since last May.

And yet, Thomas Barkin, president of the Richmond Fed, does not seem not ready to let go. “ I prefer to stay restrictive longer “, he confided in Baltimore.

Behind this cautious posture lies a fear : that of a surge in prices fueled by a rise in wages and still solid consumption. The re-election of Donald Trump, accompanied by his tariff threats and restrictive migration policies, could also increase the bill.

Some key factors that maintain this pressure:

• Domestic demand which remains robust despite rate increases;
• Uncertainty around the new administration's economic policies;
• A possible transmission of costs to consumers via higher prices;
• A labor market that leans more toward hiring than firing.

In short, consumers walk a tightropestuck between rising prices and interest rates that won't come down.

The American economy under pressure: the Fed's risky bet

The American economy continues to play on investors' nerves. While the Fed's key rates have been lowered to 4.33% at the end of last yearcausing the crypto market to fall on occasion, the debate rages on the duration of this restrictive policy. For Thomas Barkin, maintaining high rates is a necessity to avoid a new inflationary outbreak. But is it sustainable?

The job market, often seen as an economic barometer, remains surprisingly robust. Barkin predicts more hires than layoffswhich could fuel tensions on wages and therefore on prices. On the business side, optimism seems to be in order, driven by promises of tax cuts and business-friendly policies.

But the economy is not just about glossy indicators. Behind the numbers, cracks are starting to appear. There US dependence on foreign capitalparticularly Chinese and Japanese, raises concerns. Abra Global CEO Bill Barhydt highlights a structural problem: the loss of attractiveness of American bondscoupled with a colossal debt that the State is struggling to refinance.

Experts fear a vicious circle where high rates, intended to combat inflation, end up slowing growth. In the meantime, Americans are watching their portfolios, hoping that the Fed finally finds a balance.

For Donald Trump, it is clear: the Fed is the main brake on the American economy. He campaigns for a rate cut, but the president of the Fed, Jerome Powell, does not want to hear anything, brandishing the standard of independence. Between political standoff and economic uncertainties, the year 2025 promises to be a real economic battlefield.