Monetary policy may be quite effective in influencing income distribution and wealth distribution by a change in interest rates, asset prices and even employment rates.

If an economy is scaled by the Central Bank with the help of declining interest rates, then wealthy people benefit the most. This is so because, with lower rates, borrowing becomes cheaper and thus, investors invest more in things like stocks, real estate, and other assets, which, are expected to rise in value. Owners of such assets experience an upward social mobility and a widening of the social disparity. On the other hand, possibly, small investors, who have less money invested, will not immediately notice such advantages.

• Also, regions of expansionary monetary policies open employment opportunities but not all the employment opportunities lower income gap. The dominant employment in high-wage-generating activities like finance or technology industries might expand more than low-wage occupation hence widening the gap in wages.

While the dampening effect of expansionary monetary policy or an increase in the interest rate to tame inflation may prove particularly lethal to lower-income earners, not to mention perhaps restricted credit due to high cost of borrowing, measures put in place to control inflation may slow down job creation, especially in areas where low wage earners work.

In conclusion, monetary policy works in the general economy, and it deepens income and wealth inequality since its winners are the high-income earners while its losers are the low-income earners.