July 2, 2022
  • July 2, 2022

Central banks denounce inequalities

By on July 7, 2021 0

Data: BIS via Deutsche Bank; Graphic: Axios Visuals

The world’s central banks are increasingly using their powerful platform to highlight inequalities.

Why is this important: Central banks control the money supply and interest rates, which affects funding costs for everyone.

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  • Historically, the Federal Reserve – the central bank of the United States – had vague goals, including reaching a generic “maximum level of employment”.

  • But last August, the Fed updated its statement on goals to clarify that it was “a general and inclusive objective”.

  • “This change reflects our appreciation of the benefits of a strong labor market, especially for many low and moderate income communities,” Fed Chairman Jerome Powell said. mentionned at the time.

The big picture: The Fed’s now broader mandate, which includes achieving average inflation of 2% over time, gives it more flexibility to maintain accommodative monetary policy for longer.

What they say : Deutsche Bank strategist Jim Reid said that “in recent years central banks have become increasingly involved in the debate on many other topics, including fiscal policy, social justice, race, questions of gender, climate change and inequalities ”.

  • “These are all admirable and crucial topics to discuss and could help make the world a better place. However, it shows how the power and influence of central banks has changed and also how they seem to give governments a cover to spend on these. Questions. “

  • Reid says that’s one reason inflation could be a little hot for a while.

What to watch: In recent testimony in Congress, Powell pointed out how “unemployment continues to fall disproportionately on low-wage workers in the service sector and on African Americans and Hispanics.”

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