Historically untouchable problems – like climate change and race – are now on the table for the Federal Reserve as it moves into unfamiliar territory.
Why it’s important: The rough side has implications for how one of the world’s most influential economic bodies runs politics and regulates the nation’s banks.
Historically untouchable problems – like climate change and race – are now on the table for the Federal Reserve as it goes into unfamiliar territory.
Why it’s important: The rough side has implications for how one of the world’s most influential economic bodies runs politics and regulates the nation’s banks.
What is happening: The Fed recently set up two committees to look at the impact of climate change on the economy and banks – a sign that previous moves on this front are gaining strength.
Between lines: It may seem small, especially for issues that have threatened and affected the country for years.
- But it’s a big deal for an institution that rarely (or never) spoke publicly about these issues, let alone related them to considerations about the economy.
About the weather: The Fed is behind its peers around the world, where climate change is less politicized.
- Last year the Fed became the last to officially join a central bank climate network that has existed since 2017.
- Another example: The Bank of England will incorporate the climate into banks ’stress tests, something Fed Chairman Jerome Powell says is in the“ early stages ”of consideration.
In the race: Fed officials have hinted that the national unemployment rate would not be the only measure of unemployment they consider when measuring the health of the economy.
- Black unemployment, which tends to fall much more slowly, could also be a major factor.
I’ll be … backing down against the idea that we’re all fine if the aggregate [unemployment rate] is at a given time, but some of these specific populations are still in significant difficulty.
– Raphael Bostic, the only black leader of a Fed bank and a voting member of Fed policy, earlier this month
Flashback: In 2019, Powell began calling for the importance of keeping the economy humming so that minority and low-income workers could reap the benefits.
- Powell has said the Fed’s pandemic-era policies “absolutely” will not worsen income inequality in the United States.
- Yes, but: A New York Fed study this year found that easy money policies benefit the rich more than people on lower incomes, which exacerbates inequality.
Note: As the Fed gets stronger on the importance of diversity, it faces a lack of diversity in its own ranks.
The big question: Whether the maritime change over climate and race is lasting or lasting.
- “As long as the Fed is governed by reputable people, I think a lot of those changes are here to stay,” Brookings Institution Fellow Adele Morris tells Axios.
What to see: Republican resistance.
- The last: Senator Pat Toomey, the top Republican on the Senate’s powerful Banking Committee, warned this week of a “fluid mission” to the Fed’s regional banks, and did research on issues such as climate change and racial justice.