Historically speaking untouchable problems – like climate change and race – are now on the table for the Federal Reserve, which is moving into further uncharted territory.
Why it matters: The turnaround affects how one of the world’s most influential economic bodies directs policy and regulates the country’s banks.
Historically speaking untouchable problems – like climate change and race – are now on the table for the Federal Reserve, which is moving into further uncharted territory.
Why it matters: The turnaround affects how one of the world’s most influential economic bodies directs policy and regulates the country’s banks.
What is going on: The Fed recently set up two committees to look at the impact of climate change on the economy and banks – a sign that previous moves on this front are gaining some traction.
Between the lines: It can feel minor, especially for issues that have threatened and plagued the country for years.
- But it’s a big deal for an institution that rarely, if ever, spoke publicly about these issues, let alone intertwined them with considerations about economics.
About climate: The Fed is behind its colleagues around the world where climate change is less politicized.
- Last year, the Fed became the last to officially join a central bank climate network that’s been around since 2017.
- Another example: The Bank of England will include the climate in bank stress tests – something Fed Chairman Jerome Powell said is under consideration in the “early stages”.
On race: Fed officials have suggested that the national unemployment rate would not be the only unemployment measure they look at when measuring the health of the economy.
- Black unemployment – which tends to decline much more slowly – can also be a factor.
I’m going to … push back against the idea that we’re all okay when the generator is down [unemployment rate] is at some point, but some of these audiences are still in significant distress.
– Raphael Bostic, the only black leader of a Fed bank and a voting member on Fed policy earlier this month
Flashback: In 2019, Powell began to emphasize the importance of keeping the economy afloat so that minorities and low-income workers can reap the benefits.
- Powell has said the Fed’s pandemic policy will “absolutely” not exacerbate income inequality in America.
- Yes but: A study by the New York Fed this year found that low-income policies benefited the rich more than lower-income people, exacerbating inequality.
Of interest: As the Fed gets louder about the importance of diversity, it grapples with the lack of diversity in its own ranks.
The big question: Whether the sea changes in terms of climate and race is a blip or long-term.
- “As long as the Fed is run by reputable people, I think many of these changes will continue,” Adele Morris, a fellow at the Brookings Institution, told Axios.
What to watch: Republican opposition.
- The last: Senator Pat Toomey, the top Republican on the powerful Senate Banking Committee, warned this week of “mission creep” at the Fed’s regional banks, voicing their research on topics such as climate change and racial justice.