Holiday Economic Questions: What Bank of America Says You Should Expect

Bank of America economist Aditya Bhave says this year’s holiday gatherings may bring more than cold weather—they may spark tough conversations about inflation, housing, interest rates, and the broader U.S. economy. In a recent note, Bhave highlighted the key economic questions families are likely to ask and how consumers can make sense of today’s shifting financial landscape.

According to BofA, inflation remains a major concern. Prices are rising at nearly 3%, and tariffs continue to squeeze household budgets. While select items like computers and apparel have become cheaper compared to last year, Americans may still feel the sting when credit card statements arrive. Elevated borrowing costs and higher prices for everyday goods continue to challenge consumers, making this holiday season more expensive for many families.

Housing affordability is another pressure point. Mortgage rates hover near 6.4% and home prices remain roughly 16% above their pre-pandemic trend, creating significant barriers for new buyers. The median age of first-time homebuyers has surged to 40—an all-time high—reflecting how difficult it has become to enter the housing market.

As for interest rates, BofA notes that while some relatives may wonder why the Federal Reserve isn’t cutting rates faster, aggressive cuts could backfire. Lowering rates too quickly risks overheating the economy and could push the 10-year Treasury yield—which influences mortgage rates—even higher. Despite a softer labor market, the bank highlights a “K-shaped” economy where tech stocks soar on AI optimism and wealthier households maintain strong spending patterns.

Artificial intelligence continues to play a pivotal economic role. Data centers are described as the “poster child of the AI boom,” with heavy investment in infrastructure, software, and equipment providing a meaningful lift to U.S. growth.

Looking ahead, BofA remains cautiously optimistic about 2025, pointing to supportive fiscal policy, easing financial conditions, and sustained AI-driven investment as key drivers of continued growth.