MNI POLICY: Fed Won't Take Punch Bowl Away if Jobs Lag- Daly

The Federal Reserve will do all it can to bring about full employment including a wider array of workers suffering amid economic inequality being made even worse by the pandemic, San Francisco President Mary Daly said Tuesday.

"In the absence of sustained 2% inflation or emerging risks, such as to financial stability, we will not take the punch bowl away while so many remain on the economic sidelines," she said in the text of a speech to the University of California-Irvine.

"We've committed to finding full employment experientially, by seeing it in wages and prices. When we've achieved 2% inflation on average, we will know that we have approached our maximum and that the economy is firmly on its sustainable path," Daly said.

The Fed earlier this year shifted its long-term goals to target the shortfall from full employment rather a more symmetrical gap from that benchmark, signaling a greater commitment to tackle the biggest economic crisis since the 1930s. Officials have also said they will use more inclusive measures of the labor market and seek to narrow economic gaps between racial groups.

NET THAT LIFTS

"The Federal Reserve cannot fully solve the inequity problems before us. For that, we need everyone," Daly said. The social safety net "that simply catches people when they fall is no longer sufficient," she said, and "we need a net that lifts."

Governments should spend more on health, education and digital connectivity to make sure more people can make strides, Daly said.

Inequality may worsen with employment still 11 million less than before Covid-19 while stock markets have recovered, coming on top of disparities that have widened "almost without pause" since 1980, she said. Recent figures show the top 10% of U.S. adults took home about half of pretax income, and the top decile of households control almost 70% of the nation's wealth.

Higher inequality isn't unique to the U.S. and has also climbed in the U.K., Denmark and Sweden, fueled by global trends of automation and demand for college-educated workers, she said.