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MNI BRIEF: Easy Money Widens Racial Income Gap: NY Fed Paper

The Federal Reserve's loose monetary policy widens the racial income gap by boosting financial assets whites are more likely to own, according to new research from the New York Fed that upends prevailing conventional wisdom in economics suggesting low rates are needed to bolster black employment.

"We show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small," according to a new paper co-authored by New York Fed Assistant Vice President Moritz Shularick. "Over multi-year time horizons, the employment effects are substantially smaller than the countervailing portfolio effects."

The paper concludes that "there is little reason to think that accommodative monetary policy plays a significant role in reducing racial inequities in the way often discussed. On the contrary, it may well accentuate inequalities for extended periods."

MNI Washington Bureau | +1 202 371 2121 | pedro.dacosta@marketnews.com
MNI Washington Bureau | +1 202 371 2121 | pedro.dacosta@marketnews.com

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