MNI Policy: Fed's Rosengren: New Inequality Solutions Needed

Remarks on smaller cities falling behind; no comment on Fed interest rates

By Evan Ryser

     WASHINGTON (MNI) - Boston Fed President Eric Rosengren said new policies

must be tried to address economic inequality between different parts of the U.S.

     "The lack of economic progress in many regions of New England, and the

country - regions that continue to have significant populations - calls for new

solutions," Rosengren Friday said in prepared remarks.

     Rosengren in his prepared remarks was mum on interest rates and monetary

policy.

     Economists have traditionally been skeptical about links between geography

and inequality, Rosengren said, because people are mobile. Yet gaps in income

distribution between states are no longer shrinking, housing costs in thriving

areas have become prohibitive to workers in less prosperous places, and

migration to richer states has slowed.

     Geographic disparities are driven by the rise of "superstar cities," which

are attracting young, well-educated workers, often pushing up housing prices, he

said. More rural areas face challenges such as an ageing population, slow income

growth and worse health outcomes.

     Rosengren asked whether grant programs, such as the Boston Fed's Working

Cities Challenge that was initiated five years ago, could be expanded from its

inaugural rounds in Massachusetts to Rhode Island and then Connecticut.

     "The gap between poorer and richer places is more evident," Rosengren said.

"This has encouraged a focus on place. Greater focus on qualities that enable

economic turnaround is an important goal."

     He is speaking at the Boston Fed's 63rd Economic Conference, "A House

Divided: Geographic Disparities in Twenty-First Century America." Rosengren said

that while the Fed's primary mission is rooted in the dual mandate from

Congress, it also focuses on improving economic conditions throughout New

England.

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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