The Price Point Vol. 116 Issue 9

As Stuyvesant students prepare to enter the 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 Interest Rates in December Meeting

The growing caution of consumers, driven by slower job market growth, a slight rise in unemployment, and persistent high prices, allowed the Federal Reserve to cut interest rates once again in its December 10 meeting, lowering its benchmark rate by 0.25 percentage points, which brought the rate to a range of 3.5 to 3.75 percent—the third rate cut in 2025. The decision was split as some officials desired a larger rate cut while others advocated for no change, although the Fed decided on the cut by citing slow job gains and a gradually rising unemployment rate. For consumers, this cut will signify lower interest rates on products such as credit cards and home equity lines of credit, which have been on the decline in the past year. Mortgage rates are also lower than a year ago, although experts do not anticipate further declines in 2026.

European Union Approves EU-Mercosur Free Trade Deal

After more than 25 years of long negotiation, member states of the European Union have approved the EU-Mercosur free trade deal, which allows the European Commission to sign an agreement with the Mercosur bloc in South America—Brazil, Argentina, Paraguay, and Uruguay. Although the deal still needs to be approved by the European Parliament, this vote signals a renewed EU commitment to free trade. For example, the agreement will remove tariffs on over 90 percent of exports both ways and diversify trade, although the deal has faced opposition, especially among farmers. If it is ratified, it will create one of the largest free trade zones in the world, covering over 700 million people.

End of 2025 - Weakest Year for Job Creation Since COVID

Job growth in the United States slowed dramatically at the end of 2025, with employers adding only 50,000 new jobs in December—well below expectations and ending the weakest year since the COVID-19 pandemic for job creation. However, unemployment decreased by a small margin to 4.4 percent, which suggests that the labor market is slowing down but not seeing mass layoffs. Economic growth was also strong with a 4.3 percent expansion rate in late 2025, though that did not translate into large job gains. The Federal Reserve has cut rates to support the labor market, although policymakers are divided regarding further cuts.

Economics Concept of the Issue

The Endowment Effect

The endowment effect describes the tendency for individuals to place more psychological value on items that they own, which is often much higher than the price at which they paid for said item. When someone feels as though they own something, even very briefly, the idea of giving it up feels like a more dramatic loss to them. This is a phenomenon that is driven by loss aversion, which says that they dislike losing things that they have more than they like gaining things that they don’t have. Companies often take advantage of this behavioral bias, using tools like free trials, samples, or return policies to create a sense of ownership that makes consumers more likely to keep or continue paying for a product. This explains why negotiations often stall, since each side overvalues what they already possess and undervalues what they might gain.