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Friday, August 19, 2016

The Fed’s Effect on Black Americans

Narayana Kocherlakota:

The Fed’s Effect on Black Americans: The U.S. Federal Reserve appears to be paying more attention to how its policies affect black Americans. This is a wise move...
Imagine we’re in the midst of a severe recession. In deciding how aggressively to respond by lowering interest rates or buying assets, Fed officials must weigh the risk of unduly high inflation against the benefit of reducing unemployment. That benefit will be much greater for blacks..., any policy that reduces the overall unemployment rate by one percentage point ... reduces their unemployment rate by nearly two percentage points.
The differential impact also matters now, as the Fed contemplates removing stimulus. ...
The Fed rightly aims to pursue policies that are best for the economy as a whole. But I don’t believe that it will be seen as truly representative of all Americans unless it understands the differential impact of its policy choices on key demographic subgroups. It’s good to see from the minutes that the central bank is engaged in doing so.

    Posted by on Friday, August 19, 2016 at 10:49 AM in Economics, Monetary Policy, Unemployment | Permalink  Comments (11)


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