An emerging priority for Powell Fed: The plight of the poor
WASHINGTON (AP) — Testifying to Congress this month, Federal Reserve Chair Jerome Powell sent a message seldom heard from his predecessors: That the Fed should consider the struggles of the lowest-income Americans in setting its interest-rate policies.
“We want to remind ourselves,” Powell said, “that prosperity isn’t experienced in all communities. Low- and moderate-income communities in many cases are just starting to feel the benefits of this expansion.”
It wasn’t the first time Powell had sounded that theme of late. At a news conference in July, he noted that pay had begun rising fastest for lower-skilled workers, a shift from earlier in the economic expansion.
“This underscores for us the importance of sustaining the expansion so that the strong job market reaches more of those left behind,” he said.
The notion that the Fed should try to sustain the expansion to help the most disadvantaged people might seem self-evident. But throughout its history, the Fed, whose mandate is to stabilize prices and maximize employment, has rarely expressed the need to suit its policies to benefit the least fortunate.
With the economy expanding for an 11th year and unemployment near a 50-year low, most of Powell’s predecessors would have focused on the threat of high inflation and the possibility of raising rates to forestall it. The prevailing belief has been that addressing economic inequality or poverty is the purview of Congress, not the Fed.
Powell still says the Fed’s main focus is the health of the job market and the stability of prices. But as he nears the end of his second year as chairman, he has increasingly opened the door to the idea that the Fed can also lift up those who still struggle years after an economic expansion has boosted the fortunes of most Americans.
One driver of that change is an outreach effort the Fed launched a year ago as part of a review of its financial tools and strategy. The outreach has included 14 meetings between Fed officials and representatives from labor unions, educators and community development groups. Many participants have told Fed officials that despite entrenched poverty in some areas of the country, more disadvantaged Americans are finally finding jobs and making economic progress.
On Monday, in a working-class neighborhood in East Hartford, Connecticut, Powell and Eric Rosengren, president of Boston Federal Reserve Bank, will visit a career development program and meet with residents to get a closer look at their challenges.