Gender and Monetary Policy

Decisions by central banks can reinforce or challenge existing gender inequalities because of the different positions women and men occupy in the economy.

While we recognise that high rates of inflation result in a cost-of-living crisis that harms the well-being of women, we question whether raising interest rates and calling for pay restraint are the best ways to reduce inflation that primarily stems from international rises in prices of energy and food, and corporate profiteering.

By analysing the different ways monetary policy impacts gender inequality, we propose alternative ways monetary policy can contribute to a caring and gender-equal economy.

Monetary policy affects gender inequality through various channels:

• Unemployment: Mixed evidence, but in some cases, women tend to lose more jobs when interest rates rise.
• Wages: Changes in interest rates can impact the gender pay gap.
• Savings and Debts: Interest rate changes affect borrowers and lenders differently, often negatively impacting women.
• Financial Assets: Quantitative Easing has benefitted asset holders, who are mostly men.
• Policy Space: Higher interest rates raise borrowing costs for the government which can lead to austerity measures that disproportionately affect women, if that government is committed to reduce public debt.

A Feminist Monetary Policy Agenda

The Bank of England should be asked to adopt policies that are consistent with no increase in inequalities, or more ambitiously with a reduction in inequalities and

• Increase awareness of gender impacts of montery policy within the BoE.
• Promote women’s representation in BoE governance and decision-making.
• Conduct gender-sensitive data collection and research.
• Implement gender impact assessments for proposed monetary policy.
• Hold the BoE accountable for gender equality impact through regular reporting.
• Promote coordination between monetary and fiscal policies for gender equality.

Monetary and Fiscal Policy Coordination

Our transformational approach would see a monetary policy that supports more public investment in services that are vital for gender equality. For example through the Bank of England buying bonds directly from the Treasury to fund public investment in social infrastructure.

A more effective coordination between monetary and fiscal policies is also key to bringing inflation down without adverse impacts on gender equality. Current inflation is not the result of too much demand created by unreasonable wages and government borrowing, but of shortages of supply and increased profits from big companies. Monetary policy should accommodate the fiscal and regulatory policies needed in the short run to reduce key prices facing women; and in the medium run to improve the supply capacity of the UK economy not only through investment in the green economy but also in the care economy.

This briefing is a summary of the main ideas from the papers by Nicolas Aguila and Jeff Powell on feminist perspectives on monetary policy, commissioned by the Women’s Budget Group in 2023.