Racial Wealth Disparity Stuck in Last Century, Fed’s Bostic Says
Slowing U.S. Economy Needs More Fiscal Aid, Fed’s Bostic Says
(Bloomberg) -- Federal Reserve Bank of Atlanta President Raphael Bostic called for policy makers to make comprehensive changes to address racial wealth inequality in the U.S., which he said hasn’t changed much over the past century.
“Progress has been incremental,” Bostic said Friday in a virtual speech hosted by the Atlanta Fed and Princeton University’s Bendheim Center for Finance. “The median white household in America today holds 10 times the assets of the typical Black household. This ratio is not much improved from what it was more than 100 years ago. This argues that something more fundamental must happen.”
Bostic, the first Black president of a Fed bank in its 106-year history, called for researchers to develop a set of policies that “truly create meaningful and lasting change.” His comments follow up on an essay in June in which the former professor said it was a moral and economic imperative to end racism, a sentiment that was endorsed by Fed Chairman Jerome Powell.
Much of the wealth disparity dates to redlining, or restricting access to mortgages for minorities, Bostic said. Discrimination has continued in various forms even after that was outlawed for housing, he said.
Bostic told the conference he was optimistic for change given the amount of attention racial injustice has received this year.
“We are having these conversations, which I wouldn’t have imagined was possible several months ago,” he said. “This tells me there is an appetite for change and a willingness to work to effect it.”
Fiscal Support
Earlier, Bostic said Congress needs to provide additional fiscal support for the U.S. economy, which has lost momentum as some aid has lapsed and the coronavirus pandemic has lasted longer than expected.
“We definitely see signs of slowing,” Bostic, who doesn’t vote on monetary policy this year, said in a Bloomberg Television interview with Michael McKee. “What I would tell a policy maker is, there are lots of sectors where there is still a lot of pain and disruption that is going on. There are a lot of families who have a significant amount of uncertainty and those things will wear on our psyche and our ability to grow.”
Fed officials held interest rates near zero this week and signaled they would stay there for at least three years, vowing to delay tightening until the U.S. gets back to maximum employment and its 2% inflation target. The Federal Open Market Committee stressed there was a high level of uncertainty with much of the outlook depending on the course of the virus.
“Eviction levels in Atlanta are higher now than a year ago and the trend is going in the wrong direction,” Bostic said. “I have heard reports this is happening all over the place.”
New Framework
The Fed last month adopted a new monetary policy framework calling for an average 2% inflation, allowing for overshooting for past misses. This week’s statement pledged no rate hikes until the Fed achieved its inflation and maximum employment goals.
“The policies coming out of the long-run framework are important because we are committing to letting the economy grow a little more robustly than we might have otherwise,” Bostic said. “That has and should have positive implications for the ability of minorities and women and lower-income people to be fully attached to the economy.”
Stronger Guidance
Minneapolis Fed President Neel Kashkari dissented from this week’s statement because he felt the wording left open the door to premature tightening, he said in an essay published earlier on Friday. He preferred a stronger commitment to getting inflation up to the Fed’s goal.
“Not raising rates for roughly a year after core inflation first crosses 2% is consistent with a strategy of aiming for a modest overshoot in order to achieve average inflation of 2%,” Kashkari said. “We would only lift off once we had demonstrated that we really were at maximum employment, because core inflation would have had to actually hit or exceed 2% on a sustained basis in order to lift off.”
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