(Bloomberg) -- Federal Reserve Chair Jerome Powell cited the need to help “those left behind” in one of his first comments after the U.S. central bank cut interest rates on Wednesday, suggesting that income distribution may be playing a bigger role in Fed thinking.
In the later stages of America’s decade-long economic rebound, “wages have been rising particularly for lower paying jobs,” Powell said early in his press conference in Washington. “This underscores for us the importance of sustaining the expansion so the strong job market reaches more of those left behind.”
His comments reflect a growing debate among U.S. monetary policy makers about what they can do to address disparities in income and wealth, which have been growing for decades through both expansions and slumps.
Economists have typically argued that it’s the job of governments, via taxes and spending, to manage the distribution of resources in the economy, while central banks should focus on aggregates.
But the Fed has in recent years devoted more attention to the topic in research and speeches. Some of its officials have argued that the Fed’s past policies have been based on erroneous estimates about how low unemployment can fall, or how far wages can rise without triggering broader inflation -- and that the central bank can in fact do more to help labor than most economists believed.
Americans on lower incomes are “now feeling the recovery,” Powell said at the press conference. “The best thing we can do for those people is to sustain the expansion and keep it going.”
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