PHILADELPHIA — The Federal Reserve Bank of Philadelphia launched a research and advocacy initiative Friday to examine the interaction between economic inequality in the U.S. and its implications for macroeconomic prosperity and growth.
Philadelphia Fed President Patrick Harker announced the initiative Friday afternoon as part of final remarks at the Reinventing Our Communities Conference here. He said the Fed's general purpose is to foster growth and prosperity, and the purpose of the initiative is to help the central bank redirect its energies toward that goal by targeting economic inequality. While the Fed does not deal with public funds directly, Harker said, the central bank does help banks meet their Community Reinvestment Act requirements and can act as a go-between for community organizations and funders.
"The goal of the Fed is to create conditions in which economic growth can thrive," Harker said. "One way to encourage that growth is by ensuring every part of the country — every community, every individual — has a chance to become economically self-sustaining."
Harker said the program would conduct and share research, produce an "online information and data tool," as well as recommendations for the Federal Reserve System at large. The Philadelphia Fed will also encourage "investment strategies that promote development and inclusion" and host "economic research in action labs" over the next three years that will allow private, nonprofit and public researchers to share findings and develop policy initiatives.
The Philadelphia Fed's initiative comes as economic inequality is playing an increasing role in political discourse. Politicians of both parties paint their plans to recast the Fed as promoting prosperity for the real economy, while researcher are questioning whether the Fed's longstanding accommodative monetary policy might be hurting the poor.
The regional bank's initiative is also not the first to strike out on its own policy direction. Earlier this year, Minneapolis Fed President Neel Kashkari announced a series of symposiums aimed at examining whether the post-crisis reforms laid out in Basel III and Dodd-Frank have really ended "too big to fail."
Harker said that the Philadelphia Fed hopes its initiative will help galvanize and focus public anxiety over economic inequality in a helpful direction, rather than pushing to recapture an economic legacy that is likely gone forever.
"We can't wish for the resurgence of an economy long past; we have to adapt to new realities and use the lessons we've learned over time to usher in a new era — ideally one in which everybody can benefit," Harker said.