Fed Tackles Inflation With Its Most Diverse Leadership Ever

When Diane Swonk first attended the Federal Reserve’s annual economic conference in Jackson Hole in the late 1990s, there was a happy hour for women who attended the event. It barely filled a single table.

Now, the “Women at Jackson Hole” happy hour draws dozens of female economists and high-level decision-makers, from the United States and overseas.

{snip}

It’s not just at Jackson Hole but also in the Fed’s boardroom where its leadership has become its most diverse ever. There are more female, Black and openly gay officials contributing to the central bank’s interest-rate decisions than at any time in its 109-year history. Many are also far less wealthy than the officials they have replaced.

Over time, economists say, a wider range of voices will deepen the Fed’s perspective as it weighs the consequences of raising or lowering rates. It may also help diversify a profession that historically hasn’t been seen as particularly welcoming to women and minorities.

“Broadly, that’s helpful,” said William English, a former senior economist at the Fed who teaches at the Yale School of Management. “There’s evidence that diverse groups make better decisions.”

The central bank, as it is doing now, raises its benchmark short-term rate when it wants to lower inflation, and reduces it when it wants to accelerate hiring. Such moves, in turn, affect borrowing costs throughout the economy — for mortgages, auto loans and business loans, among others.

{snip}

Rhonda Vonshay Sharpe, an economist who is president of the Women’s Institute for Society, Equity and Race, said she welcomed the broadening of the Fed’s leadership. Sharpe said she’s “hopeful that a more diverse group of people will pay attention” to what the Fed does and aspire to high-level economic roles.

Colleges and universities, she suggested, should do more to encourage and prepare students for economic careers, including steering more of them to study mathematics.

The change at the Fed has been a rapid one, with three African Americans and three women having joined the central bank’s 19-member interest-rate committee just this year. (Under the Fed’s rotating system, only 12 of the 19 committee members vote each year on its rate decisions.)

The Fed’s influential seven-member Board of Governors, based in Washington, now includes two Black economists, Lisa Cook and Philip Jefferson, who were both nominated by President Joe Biden and were sworn in this May. They are the third and fourth Black people on the board. Governors get to vote on every Fed rate decision.

{snip}

In addition, two of the presidents of the Fed’s 12 regional banks are now Black — Raphael Bostic of the Atlanta Fed and Susan Collins of the Boston Fed. Collins, formerly provost of the University of Michigan, became Boston Fed president this year. Bostic took office in 2017.

{snip}.

Even as it has significantly diversified its leadership, the Fed has yet to address one issue: A Hispanic American has never served on the Fed’s rate-setting committee — a frequently voiced complaint of Sen. Robert Menendez, a New Jersey Democrat. For that reason, Menendez voted this year against confirming Powell’s reappointment for a second four-year term as Fed chair.

{snip}

Vincent Reinhart, a former Fed economist who is now at Dreyfus and Mellon, said it’s unusual for the Fed to have experienced so much turnover so quickly. {snip}

“This has got to be the most dramatic change in Fed leadership in one year on record,” he said.

{snip}