Affluent Americans are driving US economy and likely delaying need for Fed rate cuts

Once or twice a year, she visits her two adult children in different states. She's planning multiple other trips, including to a science fiction convention in Scotland and a Disney cruise soon after that, along with a trip next year to neolithic sites in Great Britain.

Older Americans like Harris are fueling a sustained boost to the U.S. economy. Benefiting from outsize gains in the stock and housing markets over the past several years, they are accounting for a larger share of consumer spending — the principal driver of economic growth — than ever before. As recently as March, the Fed's policymakers had projected that they would cut their benchmark rate three times this year. Since then, though, inflation measures have remained uncomfortably high, partly a consequence of brisk consumer spending. Chair Jerome Powell made clear recently that the Fed isn't confident enough that inflation is sustainably easing to cut rates.

All told, Americans’ wealth has ballooned from $98 trillion at the end of 2018 to $147 trillion five years later. Adjusting for inflation, the gains are less dramatic, but still substantial. “The baby boomers are the richest retiring generation we’ve ever had,” said Edward Yardeni, president of Yardeni Research. “Not everybody is well-off, but we've never had a retiring generation with this much wealth. That’s one of the major reasons why the economy is strong."

Harris, for one, sees this divide in her own family: Her home and car are paid off, and higher interest rates have had little effect on her finances. She recently visited a home in her neighborhood that she was surprised to see priced at $500,000. She bought hers, which she thinks could fetch a higher price, for $162,000 in 1991.

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