The Price Point

As Stuyvesant students prepare to enter the outside world, understanding the economy becomes an essential skill. In today’s society, knowledge of economics provides us with a foundation for navigating financial issues, understanding the effects of public policy on the market, and making informed decisions about our own personal finances.

Federal Reserve Cuts Rates Again in December Meeting

The Federal Reserve voted to cut the benchmark interest rate, again, by a quarter of a percent on Wednesday, December 18. This, along with the September rate cut, is a part of their initiative to fight inflation. However, although the Fed anticipates more rate cuts for 2025, they have revised their prediction, saying that borrowing costs will only be lowered by half a percentage point in 2025 instead of by a full percentage point. This rate cut will lead to lower interest rates on loans for consumers regarding things such as cars or credit cards to, ultimately, stimulate economic growth.

Economic Outlook for 2025

Coming into Trump’s presidency, there could be a decline in the S&P 500 index and capital markets during the start of 2025 as a result of companies and consumers adopting a “wait and watch” approach where they pull back spending to see what happens during the new administration. If Trump reduces government regulation and intervention—coupled with interest rate cuts—consumers should expect an increase in economic activity during the latter half of 2025.

Consumer debt is at an all time $18 trillion high, but delinquencies on debt are also at a low 3.5 percent of total debt. It seems that consumers could be ready for another wave of spending, but high debt levels are something to remain concerned about. 

The Magnificent 7 Technology stocks comprise one-third of the S&P 500 and are projected to reach $244 billion in Capital Expenditures in 2025. As a result, stock performance will have a huge impact on the future economy. For now, this extended spending and growth in technology is likely to propel the corporate side of the economy.

The Trump administration’s many proposed government spending initiatives could put pressure on Government Interest Expenditures on debt, which are at an all-time high, and result in decreased government stimulus coming into 2025.

Congestion Pricing 

            Congestion pricing officially began on January 5, 2025. Drivers will now be charged a time-dependent rate once per day when they go below 60th street in Manhattan. This intends to provide billions of dollars in new funding to a cash-strapped MTA and push more people to utilize the city's well developed transit infrastructure. Critics of congestion pricing argue it unfairly targets lower-income laborers and taxi drivers, although others believe the benefits in regards to MTA funding and improved traffic flow outweigh the harms. 

Russia Keeps Interest Rates At 21 Percent

              Despite the majority of the market anticipating that Russia would increase its interest rates in an effort to tame sky high sanction and war production induced inflation, Russia has kept its interest rates constant. The nation’s central bank announced that these interest rates are due to an unexpectedly early economic slowdown originally projected to occur in late 2025. Putin claims that, despite incredibly high inflation, the Russian economy is performing well due to the fact that wage growth has marginally outpaced inflation. 

Economics Concept of the Issue

Economic Growth

Economic growth is an increase in the production of goods and services of an economy. These aggregate gains in productivity often, but not always, lead to a rise in average national income. This cycle has to be carefully managed, or it can generate inflationary pressure by rapidly hiking the value of goods due to higher expected personal income. Inflationary pressure is an expected consequence of almost any economic growth, and it leads to the adjustment of most growth figures for inflation. Hence, real GDP growth is probably the best measure of economic growth of a whole economy, although individual facets should be looked at more effectively via other metrics.