Top Fed Official: Inequality May Impede Economic Growth

Source: Shahien Nasiripour and Arthur Delaney / The Huffington Post

WASHINGTON — A top Federal Reserve policymaker has raised the possibility that rising inequality may restrain economic growth for several years in a sign the central bank may be worried about the increasing gap between the rich and poor.

“In my view, the large and increasing amount of inequality in income and wealth, which has been an ongoing development for decades, may have exacerbated the crisis,” Fed governor Sarah Bloom Raskin said Thursday in a speech delivered in Washington. “More research is required to determine whether it may also pose a significant headwind to the recovery from the crisis for years to come.”

Home values rising at their pre-recession pace may help alleviate some of the wealth gap, Raskin said, but “some of the restraints on the recovery may be quite long-lasting.”

Raskin’s comments are among the most forceful to date from any current member of the Fed’s seven-person Board of Governors regarding wealth, income inequality, and how dynamics in household wealth may be impeding growth and prolonging the realization of a full-fledged recovery for millions of struggling U.S. families.

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