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Central banks need to keep a close eye on how their decisions may exacerbate economic disparities, according to European Central Bank Governing Council member Gabriel Makhlouf.
“Inequality is something central banks do need to pay close attention to,” Makhlouf told a conference Friday in Lisbon. “When inequality impacts social capital, it impacts ultimately on the ecosystem that central banks operate within and the trust that the public has in that ecosystem.”
After the global pandemic heightened inequality across the globe, Russia's invasion of Ukraine is driving already-lofty inflation rates higher still -- hitting the poorest within society most severely.
Despite some central banks widening their remits in recent years, Makhlouf said they “do not have the mandate or tools to deal with society's concerns about excess income or wealth inequality -- governments are best placed to do that.”
In its decisions, the ECB's Governing Council “does take proportionality into account and does need to understand the implications of its decisions,” he said.
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