Fed's Brainard says inequality may sap U.S. consumer spending

Wide disparities in wealth and income remain in the U.S., Federal Reserve Governor Lael Brainard said, citing soon-to-be-published data from the central bank’s latest Survey of Consumer Finances.

“Aside from reducing the long-run productive potential of the economy, persistently high levels of income and wealth inequality may also have implications for the robustness of consumer spending,” Brainard said Tuesday in the text of her remarks at a Fed board conference on disparities in the labor market.

In remarks that place her among a growing chorus of economists who say income and wealth disparities have significance for overall economic growth, Brainard said that while the Fed doesn’t have good policy tools to tackle barriers contributing to inequality, it needs to understand them as it assesses maximum employment and potential growth.

The share of income held by the top 1% of households reached 24% in 2015, up from 17% in 1988, Brainard said, citing the Fed’s most recent Survey of Consumer Finances, which will be released Wednesday. The share of wealth held by the top 1% rose to 39% in 2016, up from 30% in 1989.

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Lael Brainard, governor of the U.S. Federal Reserve, listens during a meeting of the Board of Governors of the Federal Reserve in Washington, D.C., U.S., on Tuesday, May 3, 2016. Hedge funds, insurers and other companies that do business with Wall Street megabanks are poised to pay a price for regulators' efforts to make sure any future collapse of a giant lender doesn't tank the entire financial system. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Lael Brainard

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Economy Lael Brainard Federal Reserve FOMC
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