Economists have described the U.S. economy as “K-shaped” in recent months, which occurs when different segments of the economy experience different outcomes. In this case, lower-income households are experiencing higher rates of inflation than their middle- and higher-income household peers.
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“Lower-income households continue to face the highest inflation rates, even as the gap with the higher-income cohort has narrowed since 2024,” said Bank of America.
Rising Costs Pressure Lower-Income Spending
Lower-income households face higher rates of inflation because their top spending categories by wallet share, like housing, transportation, and food, have faced elevated inflation. Housing takes up the largest share at 33%, followed by transportation at 17% and food at 13%.
Heading into 2026, Bank of America warns that lower-income households are especially vulnerable to economic shocks, which could further amplify their trend of cutting back on discretionary spending.
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