Photographer: Kena Betancur/AFP/Getty Images

Keeping interest rates low in an effort to boost a weak economy, which the Federal Reserve has signaled it will do through at least 2023, may actually exacerbate wealth inequality between White and Black households, according to a new economic paper.

The gains in stock prices that come with a low interest-rate environment and disproportionately benefit White Americans, far outweigh the job and income gains that Black citizens experience at the same time, according to the paper released Friday. Its authors include Alina Bartscher from the University of Bonn and New York Fed economist Moritz Schularick.

Jobless rate for Black Americans is higher than that for White citizens

“Our analysis therefore does not bode well for the suggestion made by politicians and central bankers that a more accommodative monetary policy helps alleviate racial inequalities,” they wrote. “With the instruments available -– all of which work through effects on asset prices and interest rates -– a central bank would not be able to design policies for an income-gap reduction objective without increasing wealth inequality.”

Because White Americans own a disproportionate share of wealth-building assets like stocks and homes, their gains in a low interest-rate environment may actually widen the wealth gap. The S&P 500 Index rose 16% last year even amid the pandemic. Unemployment, which surged for all Americans, remains at 9.9% for Black Americans, while White workers have seen their rate fall to 6%.

The authors found that Black households on average own 30 cents per dollar of housing held by White households, and 9 cents per dollar of White households’ stock holdings.

Read more: The Fed Wakes Up to Race



Source Google News