The Fed has generally not focused on advancing racial equity. Should that approach change? Yes, according to the House majority that recently passed H.R. 2543, the Federal Reserve Racial and Economic Equity Act. President Joe Biden supports the bill, although it faces an uncertain prospect in the Senate.
The Federal Reserve Act, as amended in 1977, gives the Fed a dual mandate of maximum employment and stable prices. H.R. 2543 would add a third mandate: The Fed is to foster “the elimination of disparities across racial and ethnic groups with respect to employment, income, wealth, and access to affordable credit.” The Fed hasn’t had a stellar record in achieving its original mandates, as indicated by the current inflation rate. Achieving a mandate of racial equity would almost certainly be beyond the Fed’s capabilities and would draw it into politics in a way likely to undermine its independence.
