JACKSON HOLE, Wyoming (AP) — When Diane Swank first attended the Federal Reserve’s annual economic conference at Jackson Hole in the late 1990s, it was happy hour for the women attending the event. He barely filled one table.
Now, Women in Jackson Hole Happy Hour brings together dozens of women economists and senior decision-makers from the United States and beyond.
“I’m just glad there’s a queue now lined up in the ladies’ room,” said Swank, a longtime Fed watcher and chief economist at accounting giant KPMG.
This is happening not only in Jackson Hole, but also in the Fed’s boardroom, where its leadership has become the most diverse in history. More women, blacks and openly gay men are involved in central bank interest rate decisions than at any time in its 109-year history. Many are also much less wealthy than the officials they replaced.
Over time, economists say, a wider range of opinions will deepen the Fed’s view as it weighs the implications of raising or lowering rates. It can also help diversify a profession that has historically not been seen as particularly favorable to women and minorities.
“It’s generally useful,” said William English, a former senior Fed economist who teaches at the Yale School of Management. “There is evidence that different groups make better decisions.”
The central bank, as now, raises the base short-term rate when it wants to reduce inflation and lowers it when it wants to speed up hiring. Such moves, in turn, affect the cost of borrowing throughout the economy—for mortgages, auto loans, and business loans, among others.
In his speech at the Jackson Hole symposium on Friday, Chairman Jerome Powell stressed that the Fed plans further interest rate hikes and expects the base rate to remain high until the worst inflation spike in four decades subsides, even if this will result in job losses and financial pain for households and businesses.
Rhonda Wonshai Sharp, economist and president of the Women’s Institute for Society, Justice and Race, said she welcomed the expansion of the Fed’s leadership. Sharpe said she “hopes a more diverse group of people will take notice” of what the Fed is doing and seek high economic roles.
In her opinion, colleges and universities should do more to encourage and prepare students for economic careers, including sending more of them to study mathematics.
The change at the Fed has come quickly: This year alone, three African Americans and three women have joined the central bank’s 19-member interest rate committee. (Under the Fed’s rotating system, only 12 of the 19 committee members vote on interest rate decisions each year.)
The powerful seven-member Fed’s Washington-based board of governors now includes two black economists, Lisa Cook and Philip Jefferson, who were appointed by President Joe Biden and sworn in last May. They are the third and fourth blacks on the board. Governors can vote on every Fed interest rate decision.
Biden also promoted Lael Brainard, governor since 2014, to the powerful position of vice chairman of the board.
In addition, two of the Fed’s 12 regional bank presidents are now black, Rafael Bostic of the Atlanta Fed and Susan Collins of the Boston Fed. Collins, a former provost of the University of Michigan, became president of the Boston Fed this year. Bostic took office in 2017.
Just last week, Lori Logan, a former high-ranking official at the Federal Reserve Bank of New York, became president of the Federal Reserve Bank of Dallas. Five presidents of regional banks are women.
Nela Richardson, chief economist at payroll firm ADP, said the new politicians’ backgrounds and experience are similar to those of their predecessors: Cook, Jefferson and Collins have PhDs. economists are above average among new Fed officials, she said.
Richardson suggested that having more women in the leadership of the Fed is particularly important now because many of the problems facing the central bank, including the very low unemployment rate that fuels wage growth and inflation, are linked to women’s ability to join the workforce. . Fewer women now work, especially mothers of young children, compared to pre-pandemic trends.
This shortfall is partly due to the decline in the number of childcare workers since the pandemic. With fewer women working or looking for work, many businesses have to raise wages to compete for a smaller pool of labor. These higher wages are then often passed on to consumers in the form of higher prices, thus fueling inflation.
Swank credits Esther George, president of the Federal Reserve Bank of Kansas City, for bringing about change at the Jackson Hole conference by inviting more women over the years, including Cook and Collins, to participate in the discussions. Each year, some 130 influential central bankers and economists gather in late August at Grand Teton National Park in Jackson Hole to network and discuss economic issues.
While the Fed has significantly diversified its leadership, it has yet to solve one problem: The Hispanic American has never served on the Fed’s rate-setting committee, a claim often lamented by New Jersey Democrat Senator Robert Menendez. For that reason, Menendez voted this year against Powell’s reappointment for a second four-year term as Fed chairman.
This year, Biden also appointed Michael Barr, a former Treasury Department official, to run the Fed, taking all seven board seats for the first time in almost a decade.
Vincent Reinhart, a former Fed economist who now works for Dreyfus and Mellon, said it’s unusual for the Fed that the Fed has weathered so much staff turnover so quickly. Fed governors are elected on a staggered basis, which should result in one vacancy every two years. Presidents of regional banks have a five-year term of office, which can be extended.
“This should be the most dramatic change in Fed leadership in a year in history,” he said.
New members, including Barr, are more likely to opt for lower rates to support the economy and hiring, Reinhart said. However, at this point, with inflation nearing a 40-year high, the Fed’s policy committee is moving unanimously towards a sharp rate hike to try to cool the economy and bring down inflation. At the moment, there are few signs of disagreement with this approach.
Tim Dye, chief US economist at SGH Macro, suggested that the Fed differs from the Supreme Court in one important respect: that the president’s appointment of several new Fed board members does not necessarily affect central bank policy.
According to Dai, the Fed is more of a technocratic institution “where you’re more likely to see people’s views change over time” in response to changing economic data. At the July meeting, all 12 members of the Fed’s policy committee voted in favor of a significant three-quarter-point rate hike—an unusually large increase.
Still, Reinhart said if inflation falls substantially and is under control and unemployment starts to rise as the Fed’s rate hike squeezes the economy, some of Biden’s appointees could start advocating an end to the hike — or even a cut. rates.
The result could be less unanimity on the Fed’s decisions, Reinhart said. Or Powell could end up putting a hold on rate hikes sooner than he would like to keep the consensus going.
“There is much more scope for differences of opinion as we drag out this cycle of rate hikes,” he said.
Christopher Rugaber, Associated Press