U.S. Federal Reserve Governor Lael Brainard on Tuesday warned that widening income and wealth inequality in the United States could dampen consumer spending.
"Persistently high levels of income and wealth inequality may also have implications for the robustness of consumer spending, which accounts for roughly two-thirds of aggregate spending in the United States," said Brainard in a research conference in Washington D.C..
She quoted research results as saying that widening income and wealth inequality may damp consumer spending in the aggregate, as the wealthiest households are likely to save a much larger proportion of any additional income they earn compared to households in lower income groups that are likely to spend a higher proportion on goods and services.
The United States is now facing widening income and wealth gap, as a latest Fed survey report shows, said the Fed official.
According to the Fed report which is due to be released Wednesday, the share of income held by the top one percent of households reached 24 percent in 2015, up from 17 percent in 1988; and the share of wealth held by the top one percent rose to 39 percent in 2016, up from 30 percent in 1989.
The Fed official also warned that disparities in employment could reduce the long-run potential of the economy.
In United States, the national unemployment rate dropped to historic low of 4.4 percent in August, while the unemployment rate for Hispanics was 5.2 percent and 7.7 percent for African Americans.
"While the policy tools available to the Federal Reserve are not well suited to addressing the barriers that contribute to persistent disparities in labor market outcomes, understanding these barriers and efforts to address them is vital in assessing maximum employment as well as potential growth," said Brainard.
