Ensayos Económicos N°79- Mayo 2022

Monetary Policy and Inequality

Claudio Borio
Bank of International Settlements


The nexus between monetary policy and inequality has attracted attention since the Great Financial Crisis. By keeping interest rates unusually low for unusually long to engineer a recovery and raise inflation, central banks have contributed to the perception that they have been raising inequality. But understanding the nexus requires a more holistic analysis. Long-term trends in inequality are not a monetary phenomenon: they reflect structural forces that are beyond the reach of monetary policy. Nevertheless, it can do a lot to foster a more equitable distribution over business cycles: its mandate requires it to tackle the major sources of inequality over business fluctuations: price, macroeconomic and, hence, financial instability. Changes in the nature of the business cycle have complicated this task, calling for greater support from other policies. (This article is based on the presentation made by the author at the 2021 Monetary and Banking Conference of the Central Bank of Argentina).

Palabras Clave: business cycle, financial stability, inequality, inflation, monetary policy

Códigos JEL: E30, E31, E44, E52, D63

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Fecha de publicación: 27/05/2022

Cómo citar este trabajo: Borio, C. (2022); "Monetary Policy and Inequality", Ensayos Económicos, N°79, Mayo, pp. 148-158.