Monetary Policy & Inflation | Politics & Geopolitics | US
Rich vs Poor – Who Suffers Most from Fed Hiking?
- By Sam van de Schootbrugge
- 6 min read
Summary
- A new Federal Reserve Bank of Cleveland working paper examines the inflationary and employment responses of different US cities to interest rate rises.
- It finds inflation declines faster in poorer cities than wealthier ones, but at the cost of greater employment losses.
- With inequality 27% higher than during the 70s and 80s, the paper’s results imply that the economic costs of reducing inflation may be relatively higher this time around.
Introduction
We are only beginning to understand how monetary policy impacts different individuals in society. The models in most pre-2010s textbooks show central bank decisions affecting different regions and their populations equally. But new spending data and a growing archive of consumer surveys is giving researchers the empirical firepower to uncover the wide-ranging household responses to Fed policy.
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