June 23, 2017 / 4:47 PM / 3 months ago

Official urges limited Fed role in addressing U.S. inequality

Fashionistas pose for photographs in front of a homeless man outside Moynihan Station following a showing of the Rag & Bone Spring/Summer 2013 collection during New York Fashion Week September 7, 2012. REUTERS/Lucas Jackson

CLEVELAND (Reuters) - The Federal Reserve cannot directly address the problems of inequality, globalization and the challenges facing lower-income Americans, a Fed official said on Friday, though it can help identify solutions for legislators to take up.

Cleveland Fed President Loretta Mester did not comment on interest rates or U.S. economic prospects in her prepared remarks. Instead she told a conference on housing and inequality here that the central bank has a limited role to play in solving problems that beset the world’s largest economy.

“While monetary policy cannot address issues such as income inequality, the longer-run issues of workforce development, or the distributional effects of globalization and technological change, other government policies and private-public programs - if they are well-designed - can,” said Mester said at the Fed-sponsored event.

“The Fed is committed to increasing knowledge about the economic challenges facing low- and moderate-income households and communities and helping to identify effective policies and best practices to address these challenges,” added Mester, a hawkish rate-setter who votes on policy next year under a rotation.

Since the 2007-2009 financial crisis prompted the Fed to take extraordinary steps to revive the economy, some advocacy groups and lawmakers have argued it should play a bigger role in leveling society’s playing field. Fed Chair Janet Yellen has warned that economic inequalities, and barriers to women in the workforce, hurt broader economic growth.

The Fed’s congressional mandate is to achieve the lowest sustainable level of unemployment as well as price stability, which the Fed defines as 2-percent annual inflation.

Reporting by Jonathan Spicer; Editing by Chizu Nomiyama

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