Fed's rate hikes threaten its goal of narrowing racial gaps

America’s hiring boom of the past year has narrowed racial disparities in unemployment

WASHINGTON -- America’s hiring boom of the past year has narrowed racial disparities in unemployment. Yet the Federal Reserve’s ongoing interest rate hikes — shaping up to be the steepest in 15 years — threaten to reverse that progress.

The Fed's rate hikes will mean higher borrowing rates that could hobble the job market and undercut a goal the Fed unveiled two years ago: To keep rates ultra-low for as long as possible, to help less advantaged workers, who often don't benefit much from job growth until late in an economic expansion.

Now, though, facing the worst inflation in four decades, the Fed has begun tightening credit and is expected to keep raising its benchmark short-term rate multiple times this year and next. Such rapid hikes typically slow borrowing and spending and can raise unemployment and even cause a recession. During such downturns, Black and Hispanic Americans commonly suffer higher jobless rates.

The Fed's shift away from low rates comes as the African American unemployment rate has reached 6.6%, down sharply from its pandemic high of nearly 17% and a relatively low level historically. Yet it remains twice the 3.3% rate for whites. Hispanic unemployment is 4.4%.