The U.S. economic expansion is “two-speed,” favoring those who are already well-off financially, said Vincent Reinhart, the chief U.S. economist at Morgan Stanley.

“Income inequality is increasing,” Reinhart said today on the television program “Bloomberg Surveillance” with Tom Keene and Sara Eisen. “Real wages, except at the very highest incomes, are actually stagnant to going down.”

The weekly Bloomberg Consumer Comfort index has shown optimism among lower-income Americans has deteriorated. The index for households earning less than $15,000 fell in the period ended July 14 to minus 69.2, its worst since January, from minus 66.6 a week earlier. For households earning more than $100,000, the index eased to 14.9 after 21 in the prior week, which matched the highest level since November 2007.

“It’s been a two-speed recovery,” Reinhart said. “The upper’s done better than lower.”

Still, strong capital spending and the housing market signal the expansion will continue, Reinhart said. The U.S. added 195,000 jobs for a second month in June, the Labor Department reported earlier this month.

“The data are mixed for sure, but the composition of the first half makes us a little more encouraged that we have durability going into the second half,” Reinhart said.

QE ‘Risky’

The former director of the Federal Reserve’s Division of Monetary Affairs said the Fed’s “quantitative easing” program is “unconventional and risky.”

“It is recently unchartered waters for central banking,” Reinhart said. The program now consists of $85 billion a month in bond purchases.

The Fed is currently considering reducing those purchases even with unemployment at 7.6 percent and the Fed’s preferred inflation index showing prices rising 1 percent from a year earlier, below the central bank’s 2 percent goal.

Half of economists in a Bloomberg survey July 18 to July 22 said the Fed will begin tapering in September.

The world’s largest economy grew at a 1.8 percent annualized rate in the first quarter, according to the Commerce Department.

Reinhart has served as Morgan Stanley’s chief U.S. economist in New York since 2011.

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