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UPDATE 1-Fed's Brainard: Wealth of middle class families still below level before Great Recession

before Great Recession@ (Adds more comments from Brainard)

WASHINGTON, May 10 (Reuters) - The wealth of middle class families still has not recovered from the 2007 to 2009 economic crisis, with a lagging rebound in home equity and slow wage growth continuing to widen inequality through the end of last year, Fed Gov. Lael Brainard said on Friday in a snapshot of soon to be released Fed data.

Brainard, in a broad discussion about the economic prospects of the middle class, said the Fed is increasingly concerned about the impact on the economy overall if families in the middle of the income distribution continue to struggle in their ability to build wealth, finance homes and educations, and even stay current with their bills.

Families in the 40th to 70th percentiles held wealth of around $340,000 at the end of 2018, based on a new Fed study whose results Brainard discussed. This was below the levels before the crisis and 13 times less than the average $4.5 million held by the top 10 percent.

"A strong middle class is often seen as a cornerstone of a vibrant economy and, beyond that, a resilient democracy," Brainard said. "The discrepancy between slow growth in income and wealth, on the one hand, and rising costs of housing, health care, and education, on the other, may be making it more difficult for middle-income families to achieve middle-class financial security. Long-term, the shifting of wealth and income to the top of the distribution and away from the middle could pose challenges to the health and resilience of our economy."

While monetary policy cannot necessarily influence those distributional issues, Brainard said the Fed needs to understand dynamics that "may have important implications for macroeconomic developments, such as the evolution of consumption" if middle income families, earning between $40,000 and $85,000 a year, aren't succeeding. (Reporting by Howard Schneider Editing by Chizu Nomiyama)