The American flag can be seen flying in Time Square in New York City, USA.
Jakub Porzycki | Null Photo | Getty Images
Americans’ inflation-adjusted incomes will rise and poverty will fall in 2025, according to new Census Bureau data released Tuesday as the Federal Reserve meets to decide whether inflation necessitates even higher interest rates.
Real median household income increased 2.6% to $87,460 last year, the Census Bureau reported as part of a series of data released Tuesday. The poverty rate fell by almost half a percentage point to 10.2%. Last year, the poverty threshold for a family of four was $32,970.
Treasury Secretary Scott Bessent praised the statistics, which were announced during testimony before the House Economics Committee. He said the Census Bureau data is “some inconvenient facts” for the Trump administration’s political opponents.
Democrats used the committee hearing to attack Mr. Bessent, citing rising gas prices and other economic burdens. The average interest rate on a new 30-year fixed-rate mortgage exceeded 7% last week. According to the Consumer Price Index, prices in August rose 3.4% year-on-year.
The census data covers 2025 and does not take into account recent inflation or other economic changes since the start of the Iran war. But data from Trump’s first year in office shows that median income for U.S. households increased, even after adjusting for inflation.
The agency has not determined what is causing Americans’ improved lives. Basic data suggests that improvements in the labor market have contributed to boosting household incomes.
The decline in poverty appears to be concentrated among households with children and working-age households, rather than among retirees.
Another poverty measure, which accounts for the benefits families receive from social safety nets, remained unchanged in 2025. The measure could come under pressure as the Republican tax and policy law, enacted in the summer of 2025, takes effect gradually. The bill, known as the “Big and Beautiful Bill,” cut taxes for some working families, but paid for it in part by cutting federal spending by tightening restrictions on some low-income programs.
The Congressional Budget Office projects that spending on food stamps, known as SNAP, will decrease by $211 billion by 2035 because the law will reduce the number of people eligible for nutritional assistance.
Meanwhile, the Fed is on the brink of raising its benchmark short-term interest rate. New chairman Kevin Warsh said he was concerned about inflation. Interest rates, the Fed’s tool for combating inflation, are a blunt instrument. By raising interest rates, the Fed raises borrowing costs for the entire economy. This weakens overall economic growth and slows price increases.
The Fed needs to weigh that risk against the damage that inflation will do to Americans’ lives. Fed officials have frequently noted that rising prices fall hardest on the lowest earners, who are least able to change their spending plans.
The Fed will announce its interest rate decision on Wednesday afternoon.
