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Brainard, in a broad discussion about the
economic prospects of the middle class, said the Fed is
increasingly concerned about the impact on the economy overall
if families in the middle of the income distribution continue to
struggle in their ability to build wealth, finance homes and
educations, and even stay current with their bills.
Families in the 40th to 70th percentiles held wealth of around
$340,000 at the end of 2018, based on a new Fed study whose
results Brainard discussed. This was below the levels before the
crisis and 13 times less than the average $4.5 million held by
the top 10 percent.
"A strong middle class is often seen as a cornerstone of a
vibrant economy and, beyond that, a resilient democracy,"
Brainard said. "The discrepancy between slow growth in income
and wealth, on the one hand, and rising costs of housing, health
care, and education, on the other, may be making it more
difficult for middle-income families to achieve middle-class
financial security. Long-term, the shifting of wealth and income
to the top of the distribution and away from the middle could
pose challenges to the health and resilience of our economy."
While monetary policy cannot necessarily influence those
distributional issues, Brainard said the Fed needs to understand
dynamics that "may have important implications for macroeconomic
developments, such as the evolution of consumption" if middle
income families, earning between $40,000 and $85,000 a year,
aren't succeeding.
(Reporting by Howard Schneider; Editing by Chizu Nomiyama)
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