By Emily Peck

March 30, 2022

The Federal Reserve’s commitment to an inclusive recovery is getting tested as it begins raising rates to combat inflation.

Why it matters: Higher interest rates typically slow the economy, leading to higher unemployment rates. And while the overall jobless rate is now low by historical standards, the Black unemployment rate is double that of whites and the Hispanic rate exceeds whites by more than a point.

Catch up quick: In August 2020, the Fed announced that its mandate to achieve maximum employment should be “broad-based and inclusive” — meaning it would let the economy run hotter to pull more people into the job market.

  • It also aimed to pay attention to employment stats for different segments of the population instead of just the overall numbers.

The big picture: While rising prices can hurt Black workers, who are disproportionately represented in lower-paying jobs, measures to fight inflation are harsh medicine.

  • “Inflation can have disproportionate adverse effects by race, but anti-inflation measures can have a disproportionate adverse effect by race. I’m not sure which one is necessarily worse,” said William A. Darity, an economist at Duke, at a Brookings Institution event last week, where debate developed around the issue of race and the Fed.