The counterplan incorporates analysis of inequality while preserving the core objectives of the Fed

Julian Jacobs, “Should reducing inequality be a central bank mandate?” Official Monetary and Financial Institutions Forum, 1-27-23, https://www.omfif.org/2023/01/should-reducing-inequality-be-a-central-bank-mandate/

This does not mean that central banks should ignore economic inequality when implementing their monetary framework, however. Although equality objectives may be difficult to implement, increasing awareness of inequality is not.

Central banks should take this further, using banking sector statistics to report on how inequality impacts the efficacy of their policies, and how their policies will impact inequality. Central banks should then take any disequalising effect into account when crafting their monetary responses, and they should articulate these impacts to the public and to legislators. Such an approach is similar to how central banks monitor international developments in assessing the outlook for the US economy.

Beyond this, however, central banks’ job should remain the imposing task of maintaining price stability and financial stability in the interest of maximising public welfare. The fair and efficient distribution of economic resources is a public good and central banks’ growing interest in discussing and reporting on inequality is a positive development that should be encouraged. But central bank policy is no substitute for effective social security, shock adjustment assistance and financial market regulation.

Moreover, a central bank’s political independence is particularly important to its functioning, especially in a moment of heightened polarisation and partisanship. A more holistic model that identifies inequality as a specific mandate could threaten to erode that independence and encourage more partisan behaviour. Such an outcome would be both economically hazardous and politically toxic – central bankers are unelected officials with no mandate to weigh into partisan policy debates beyond their monetary responsibilities.

Issues of economic inequality are thus principally issues of legislation, best left to elected officials that represent the will and interests of the public. Yet, given the clear relationship between monetary determinations and distributional outcomes, the emphasis by central banks on inequality as a consideration – but not a mandate – is an auspicious and badly needed development.