By Ann Saphir

(Reuters] – Jerome Powell, the second head of Federal Reserve, was approved by the Senate last week. The Federal Reserve will now be headed by a white male just like it has for much of its 108-year-old history.

However, the Fed will be able to appoint fewer than half its policymakers from white men later in the summer.

Eight of 18 people who decide monetary policy in the largest economy of the world will soon be women, and five of them will be from countries of color. This is a record that will continue to grow as the country diversifies further over the coming months.

Furthermore, over 100 Fed regional bank director, who provide regular views on the economy for the central bank officials charged with setting interest rates and are responsible for coordinating them, better reflect America’s diversity than any time before.

Still, large gaps remain.

No top policymaker is now or has ever been of Latin American heritage, for instance, and newly published data https://www.federalreserve.gov/aboutthefed/economist-and-research-assistant-diversity-data.htm from the Fed shows more than half of the nearly 1,000 PhD economists whose analyses lay the groundwork for policy decisions are white men.

At the Fed bank boards, where Fed policymakers have successfully pushed for better gender and racial diversity, more than 75% of directors work in the banking, financial or business sectors, with labor representation particularly thin, a report https://www.populardemocracy.org/news/publications/uneven-progress-inadequate-representation-2022-analysis-diversity-federal-reserve published on Thursday by the Center for Popular Democracy found.

The study found that 75% of the directors who have business experience come from large companies, rather than the smaller businesses that comprise the bulk of U.S. employers.

The Fed and Powell critics will be left scratching their heads. Last week’s Dallas Fed decision to hire a female white president over a Hispanic as its next president led U.S. New Jersey Democrat Bob Menendez is a Cuban-American Senator who voted against Powell’s second term confirmation.

Menendez stated that, despite the support of a large majority of senators for Powell’s nomination, the Fed chief was not supported by any Latino policymakers.

DIVERSITY AND CREDIBILITY

Powell has just started a battle against inflation, which is growing faster than it was in the last four decades.

To cool price pressures and lower inflation to the Fed’s target of 2%, policymakers will likely announce a number of large interest rate increases.

Economists believe that rate increases will cause job loss as the economy slows or even a recession. People of color, and those with lower education levels are the most affected by rising unemployment.

Powell has reached out to Americans to ask for their support. Powell stated that although it is painful, it is better than allowing inflation growth to continue.

Similar arguments have been made by Fed officials. They argue that strong medicines should be administered now in order to protect the long-term health of the labor force.

Kaleb Nygaard, senior research associate with the Yale Program on Financial Stability says “Having a leadership team that is more American than ever will help the Fed stay credible in the eyes the public,” he said. Public confidence is one the best tools that a central bank can have.

MAKE MORE OF THE OPPORTUNITIES AVAILABLE

However, the Fed is still far from being able to take the diversity route.

The central bank recently released data that showed 55% of Fed’s 945 PhD economists were white men. A quarter of the Fed’s 945 PhD economists are women. The majority are white. All told, there are 159 Fed economists identified as Asians. 89 identify themselves as Hispanics or Latinos. Seven are of mixed races, with only 14 being Black.

It has seen greater success in diversifying the board compositions of its twelve regional Fed banks. This is due to the Fed’s Board of Governors. The Board of Governors directly chooses two-thirds of the directors or at least has some control over their selection.

The directors then pick the new heads of regional Fed banks. They may be already having an influence.

Boston Fed Bank and Dallas Fed bank, previously run by white men, are now hiring women to replace them.

Susan Collins from the University of Michigan, who was chosen by Boston Fed to be its next chief, is now the first Black woman in charge of a regional Fed bank. Lorie Logan is currently a New York Fed markets specialist and was appointed Dallas Fed’s next chief last week. Logan is white.

Chicago and Kansas City are two additional Fed banks that will replace the current presidents. Both of them, who are both white women and men, reach mandatory retirement next January.

Change is possible at the Fed’s Board of Governors. Seven members of the Board are selected by the White House.

The Senate approved the nominations of Lisa Cook from Michigan State University and Philip Jefferson from Davidson College as Fed governors last week. Both were Black economists who had been nominated by Joe Biden. Only three Black Fed governors have been elected, the last one in 2006.

Benjamin Dulchin, Center for Popular Democracy, stated that “Diversity in their leadership matters, and not as an gesture or as symbolism but as a statement about how the Fed truly sees themselves to be… in touch the economic interests of this country.”