Can the Fed Reduce Inequality?

by Thomas L. Hogan
The American Institute for Economic Research

Politicians have recently called on the Federal Reserve to address issues of racial and income inequality. Current and former Fed officials have pointed out that monetary policy is too broad a tool to accomplish this narrow goal. Yet the Fed may have the ability to affect inequality by other, more effective means.

Presidential candidate Joe Biden has recommended that “the Fed should aggressively enhance its surveillance and targeting of persistent racial gaps in jobs, wages, and wealth.” A similar proposal by Senator Elizabeth Warren would require the Fed to pursue “the elimination of disparities across racial and ethnic groups with respect to employment, income, wealth, and access to affordable credit.”

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