Historically untouchable issues – such as climate change and the race – are now on the Federal Reserve’s table, as it progresses into unfamiliar territory.
Why does it matter: The turnaround has implications for how one of the most influential economic bodies in the world directs politics and regulates the country’s banks.
Historically untouchable issues – such as climate change and the race – are now on the Federal Reserve’s table, as it progresses into unfamiliar territory.
Why does it matter: The turnaround has implications for how one of the most influential economic bodies in the world directs politics and regulates the country’s banks.
What’s up: The Fed recently created two committees to analyze the impact of climate change on the economy and banks – a sign that earlier moves on that front are gaining momentum.
Between the lines: It may seem small, especially for issues that have threatened and plagued the country for years.
- But it is a big problem for an institution that rarely – if ever – spoke publicly about these issues, let alone entwined them in considerations about the economy.
In the mood: The Fed is after 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 been around since 2017.
- Another example: The Bank of England will incorporate the mood into the bank’s stress tests – something that Fed Chairman Jerome Powell says is in the “early stages” of consideration.
On the run: Fed officials 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 – can also be a factor.
I will be … resisting the notion that we are all right if the aggregate [unemployment rate] is at a certain point, but some of these target populations are still in significant danger.
– 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 to draw attention to the importance of keeping the economy running so that minority and low-income workers could reap the benefits.
- Powell said the Fed’s pandemic-era policies “absolutely” are not going to worsen income inequality in America.
- Yes but: A New York Fed study this year found that easy money policies benefited the wealthy more than the low-income people – exacerbating inequality.
Of importance: As the Fed speaks louder about the importance of diversity, it fights against the lack of diversity in its own ranks.
The big question: Whether the sea change in climate and race is small or lasting.
- “As long as the Fed is run by people of good standing, I think many of these changes are here to stay,” Adele Morris, a fellow at the Brookings Institution, told Axios.
What to watch: Republican resistance.
- The most recently: Senator Pat Toomey, the top Republican on the powerful Senate Banking Committee, warned this week about the “increased mission” at the Fed’s regional banks, publicizing his research on topics such as climate change and racial justice.