Even as inflation is expected to ease, the affordability debate continues to dominate the U.S.

12 December 2025

As 2025 winds down, Americans and policymakers find themselves grappling with a paradox that is at once hopeful and politically fraught: the latest forecasts suggest that inflation in the United States may slow in the year ahead, yet many people remain deeply concerned about the everyday cost of living and affordability issues that stubbornly linger across major household expenses. This dynamic, outlined in a Reuters report on December 12, highlights how economic data and public perception often diverge, shaping both policy decisions and political narratives in the run-up to the 2026 U.S. midterm elections.

At the heart of the economic outlook is the Federal Reserve’s expectation that inflation will gradually ease over the coming year. Policymakers, including Federal Reserve Chair Jerome Powell, have pointed to ongoing “disinflation” in services and forecasts showing goods price inflation declining by mid-2026. This anticipated moderation comes as part of what central bankers hope will be a return toward more stable price trends after several years of pandemic-related supply shocks and subsequent price volatility. The Fed’s projections are closely watched, not only by investors and economists but also by millions of households trying to make sense of rising costs in their daily lives.

Despite these projections, the lived experience for many Americans tells a different story. Consumer sentiment surveys reveal that people are still feeling the strain of sticker shock at the grocery store, with essential items like beef and electricity cited as particularly painful areas of rising costs. These high-impact price increases carry oversized weight in household budgets and contribute to a broader sense that everyday life remains unaffordable, even if headline inflation figures approach the Federal Reserve’s target of 2 percent. For many families, the relentlessness of price increases in key categories overshadows nuanced economic statistics and keeps affordability at the forefront of public concern.

Housing further complicates the picture. Although mortgage rates have eased somewhat from their peaks earlier in 2025, they still hover around 6.2 percent, a level well above the ultra-low rates that followed the global financial crisis of 2008 and 2009. This situation reflects not only broader interest-rate dynamics but also a deep structural shortage of housing supply. Homebuilding activity has declined in recent years, and growth in residential construction jobs has stalled, making it difficult for many prospective buyers to find affordable options or enjoy the financial relief that lower financing costs might otherwise bring. These factors combine to make housing affordability a persistent pinch point for consumers.

Tariffs have also played a role in sustaining consumer price pressures. Despite overall inflation showing signs of moderation, goods prices remain elevated in part due to ongoing tariffs that were imposed on a wide range of imported products. These duties can ripple through supply chains and result in higher costs for everyday items ranging from electronics to household goods. Even as firms adjust to these trade measures over time, the effect on prices at the retail level has contributed to a sense that many products simply cost more than they used to, regardless of broad inflation trends.

Compounding these economic realities is the political context in which they play out. With the 2026 midterms approaching, affordability has become a central theme in political debates. Public dissatisfaction with the cost of living spans party lines and places pressure on the Trump administration and congressional leaders to demonstrate tangible improvements in everyday economic conditions. While some measures point to strengths for example, wage growth that has outpaced inflation in certain sectors and stabilization in rent increases these positives have not yet translated into broad confidence among consumers. Surveys continue to show declining optimism about personal financial outlooks, signaling that confidence in the economy has not rebounded in a meaningful way.

For President Donald Trump and other policymakers, the challenge is not simply to point to macroeconomic indicators that suggest inflation is moderating. It is to address the persistent perception that everyday life feels more expensive and less attainable. That perception, if left unaddressed, could have tangible consequences at the ballot box, especially if voters feel that their wages do not keep pace with the cost of living or that essential services remain out of reach. This disconnect between economic statistics and personal experience illustrates the complexities facing leaders as they attempt to frame economic narratives in ways that resonate with the public.

At the Federal Reserve, internal debates add another layer to the picture. Some policymakers, dissenting from recent rate cuts, argue that inflation remains too high and that monetary policy should remain relatively restrictive until there is clearer evidence of sustained price stability. Others see slowing inflation and a cooling labor market as reason enough to support accommodative measures. These internal diverging views reflect broader uncertainty about how best to balance inflation control with support for economic growth and employment, particularly as the central bank navigates a landscape marked by mixed signals and data lags.

Taken together, the evolving inflation outlook and ongoing affordability concerns paint a picture of an economy at a crossroads. On paper, metrics may point toward moderation in price pressures; in practice, many households continue to feel squeezed by costs that remain high for essential goods and services. For policymakers, business leaders and everyday Americans alike, the coming year will be a test of how effectively economic policy can bridge the gap between macroeconomic progress and the tangible improvement of living standards. In a political climate where economic issues are paramount, addressing affordability concerns may prove as important as any central bank forecast or statistical projection.