Historically unattainable problems – such as climate change and race – are now on the table of the Federal Reserve as it penetrates further unexplored territory.
Why does it matter: The approximate aspect has implications for the way in which one of the most influential economic bodies in the world conducts politics and regulates the nation’s banks.
Historically unattainable problems – as well as climate change and race – are now on the table of the Federal Reserve, as it penetrates further unexplored territory.
Why does it matter: The approximate aspect has implications for the way in which one of the most influential economic bodies in the world conducts politics and regulates the nation’s banks.
What happens: The Fed has 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 some traction.
Between the lines: It can feel a little, especially for the problems that have threatened and affected the country for years.
- But it is a big problem for an institution that has rarely – if ever – spoken publicly about these issues, let alone intertwined them in economic considerations.
About the climate: The Fed is behind its colleagues 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 analysis.
In the race: Fed officials have suggested that the national unemployment rate would not be the only measure of unemployment they look at when measuring the health of the economy.
- Black unemployment – which tends to fall much more slowly – could also be a factor.
I’ll be … pushing back against the notion that we’re all fine if the aggregate [unemployment rate] they are at a certain point, but some of these target populations are still in significant distress.
– 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 say the importance of maintaining the economy so that minority and low-income workers can benefit.
- Powell said the Fed’s pandemic policies will not “absolutely” worsen America’s income inequality.
- Yes but: A New York Fed study this year found that light-hearted policies benefited the rich more than the low-income – exacerbating inequality.
Note: As the Fed grows stronger on the importance of diversity, it faces a lack of diversity in its own right.
The big question: Whether the change in the sea in terms of climate and race is sustainable or sustainable.
- “As long as the Fed is governed by reputable people, I think a lot of these changes are here to stay,” Adele Morris, a Brookings Institution colleague, told Axios.
What to look for: Resistance from Republicans.
- The most recent: Senator Pat Toomey, the top Republican on the Senate’s powerful banking committee, warned this week of the “mission creep” at the Fed’s regional banks, calling for research on topics such as climate change and racial justice.