For Bostic — widely seen as one of the most distinguished leaders in economics, and who has also been subjected to indignities like being stopped by police for no reason — grounding his vision in the country’s history of injustice was key to focusing attention on how those structures persistently affect people’s lives today.
“I’ve been Black all my life,” Bostic told The Washington Post. “And when you’re Black in America, there’s just a bunch of things that are going to happen.”
But just how the Fed should be narrowing racial and economic gaps is not completely clear.
“Part of what is needed, and what we’re wrestling with, is rethinking exactly what our mandate means,” Bostic said in an interview earlier this summer. “The important thing about our mandate is that, to me, it says we should be making sure the economy works for everyone, because that’s the way you get to the largest maximum employment. That’s the way you get to the strongest, most resilient economy.”
Under the central bank’s “dual mandate,” Fed leaders are tasked with maintaining stable prices and maximizing the number of Americans with jobs. Increasingly, liberal economists and Democratic lawmakers are calling on the Fed to target the Black unemployment rate, which is historically higher than the overall unemployment rate, to achieve a truer gauge of how Americans fare in the economy. In July, while the overall unemployment rate was 10.2 percent, it was 9.2 percent for White workers and 14.6 percent for Black workers.
Fed leaders broadly agree that discrimination and racial inequality should not exist in the economy. But the Fed’s tool kit is limited. Its main instrument of monetary policy is setting interest rates, which broadly influence the economy and cannot be engineered to target specific slices of the population.
Focusing on the Black unemployment rate would not capture disparities affecting other racial groups, officials say. Even the vast portfolio of emergency programs launched to combat this recession cannot home in on unemployed Black workers or Latino-owned small businesses, for example.
Bostic hesitates to point to a specific, short-term policy target, calling instead for deeper thought and discussion about historic racism and inequality and how that legacy still stands today. He notes that the Fed’s tools are “really broad, blunt instruments” that brush over the economy as a whole.
“I’ve been doing my own soul searching around what a statistic or sufficient statistic might look like. I’ve been actually thinking about this long before I got into this job,” Bostic said in a July webinar sponsored by the Center on Budget and Policy Priorities and Groundwork Collaborative.
“I haven’t really gotten my head around how should we think about that,” he added. “But I think it’s something I’m grappling with.”