{"id":37420,"date":"2025-10-29T16:42:29","date_gmt":"2025-10-29T16:42:29","guid":{"rendered":"https:\/\/financialrush.com\/?p=37420"},"modified":"2025-10-29T16:42:29","modified_gmt":"2025-10-29T16:42:29","slug":"how-the-fed-rate-cut-may-widen-the-generational-wealth-gap","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=37420","title":{"rendered":"How the Fed rate cut may widen the generational wealth gap"},"content":{"rendered":"

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The Federal Reserve is expected to cut interest rates<\/a> on Wednesday, and wealthy U.S. households may benefit most.\u00a0<\/p>\n

The federal funds rate<\/a> is the interest rate at which banks borrow and lend to one another overnight. A quarter-point reduction would bring the benchmark rate to a range between 3.75%-4.00%. It could fall to 3.1% by the end of 2027, according to a September forecast<\/a> from the Federal Open Market Committee.\u00a0<\/p>\n

\u201cThat really sets the floor for all other interest rates,\u201d said Michael Wagner, co-founder of Omnia Family Wealth in Aventura, Florida. \u201cWe ultimately start earning less money on cash, which makes it less attractive versus other investments.\u201d<\/p>\n<\/div>\n

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Read more CNBC personal finance coverage<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
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Reductions in the fed funds rate typically set off a chain reaction throughout the economy.<\/p>\n

For example, cash held in high-yield savings accounts typically earns less money<\/a> soon after a reduction in the federal funds rate. The change in short-term interest rates can also potentially lead to cheaper terms on longer-term loans, such as mortgages<\/a>.<\/p>\n<\/div>\n

Fed cuts may \u2018widen the generational wealth gap\u2019<\/h2>\n
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Lower interest rates can speed up economic growth and lead to an increase in hiring, experts say.\u00a0 But they are also associated with rising levels of wealth inequality.\u00a0<\/p>\n

\u201cThe Fed\u2019s easing cycle could unintentionally widen the generational wealth gap, lifting the net worth of retirees, baby boomers,\u201d\u00a0said Kathryn Rooney Vera, a chief market strategist at StoneX Group.<\/p>\n

That\u2019s because asset price booms tend to follow Fed rate cuts, and older, wealthier consumers \u2014 who own more stocks \u2014 disproportionately benefit from those market gains. Meanwhile, younger and less advantaged households with more of their assets in cash may see their returns diminish.<\/p>\n<\/div>\n

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The top 0.1% wealthiest households own over $23 trillion in financial assets as of the second quarter of 2025, according to Federal Reserve data<\/a>. That\u2019s a 91.2% increase from the $12.32 trillion recorded in the first quarter of 2020.<\/p>\n

By contrast, the bottom half of the U.S. population holds about $10 trillion in assets. That\u2019s a 46.6% increase from the start of 2020, when this segment held just $6.93 trillion in assets.<\/p>\n

Watch the <\/strong>video<\/strong><\/a> above to see how the Fed\u2019s decision to lower interest rates affects your wealth.<\/strong><\/p>\n<\/div>\n<\/div>\n\n
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