Home Business Why the Fed Has a New Framework and Why It Matters

Why the Fed Has a New Framework and Why It Matters

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As part of its new framework, the Fed describes full employment as a “broadbased and inclusive goal.” That’s shorthand for looking not just at the aggregate unemployment rate but at labor-market indicators for different segments of the population, including Black unemployment. In contrast, the Fed, using its traditional approach, raised interest rates in December 2015 for the first time since the 2008 financial crisis, in part because the overall unemployment rate was 5%, close to where the Fed had its estimate of full employment, 4.9%. But Black unemployment was 8.5%, according to revised data. Taking that gap into consideration could help reduce racial inequality.

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