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Inflation Jeopardizes the Fed’s Goal for Inclusive Employment

Political support is waning for the idea of letting the economy run hot for longer to close racial gaps.

At a job fair in Orlando.

At a job fair in Orlando.

Photographer: Paul Hennessy/SOPA Images/Sipa/AP Photo

“Broad-based and inclusive.” That’s how officials at the Federal Reserve have taken to describing the maximum employment mandate Congress handed the central bank in 1977. The addition of those modifiers is a shift that came about as part of a 20-month review of the Fed’s monetary policy framework that culminated last summer against the backdrop of a national reckoning on race sparked by the killing of George Floyd.

The idea is that economic indicators such as the Black unemployment rate will now be incorporated into assessments of whether or not the U.S. has reached maximum employment. There’s a lot riding on this reconceptualization because Fed Chair Jerome Powell and his colleagues have repeatedly stated that getting there is a prerequisite for higher interest rates.