It was in 1973 when influential economist Arthur Okun asked whether a high-pressure economy could contribute to upward mobility of workers. But a subsequent outbreak of double-digit inflation convinced central bankers that wasn’t the way to go.

New Normal
Now may be time for a rethink, Powell suggested in a speech in Paris this month. Policy makers face a different world today: a world of low inflation, globalization and aging societies.

It’s also a world where yawning income and wealth gaps are spurring a populist backlash against the established economic order, including central banks.

Powell has said repeatedly that it’s up to Congress and the White House to tackle such deep-rooted ills as income inequality and racial disparities in the labor market.

But he acknowledged this month that the Fed has a role to play, too. “What we can do,” he told lawmakers, “goes back to taking seriously the job you’ve given us, which is maximum employment.”

Economist Laurence Meyer said central bankers rarely talked about the labor market’s impact on minorities or inequality when he was a Fed governor from 1996 to 2002.

Now, officials talk about those topics all the time. And they think they’re having an effect as the stretched labor market draws in workers from the sidelines.

“One could say, ‘Thank the Fed,’” said Meyer, who heads his own Washington-based consulting firm. “At least somebody is doing something about inequality.”

This article was provided by Bloomberg News.

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