Fed’s Powell, on Eve of Next Rate Hike, Urged to Protect Jobs

(Reuters) – U.S. Senate Banking Committee Chair Sherrod Brown on Tuesday urged Federal Reserve Chair Jerome Powell to watch out about tightening monetary policy a lot that tens of millions of Americans already affected by high inflation also lose their jobs.

“It’s your job to combat inflation, but at the identical time, you could not lose sight of your responsibility to be sure that we’ve full employment,” Brown said within the letter, also addressed to the Fed’s Board of Governors and released publicly by Brown’s office. “We must avoid having our short-term advances and robust labor market overwhelmed by the results of aggressive monetary actions to diminish inflation, especially when the Fed’s actions don’t address its predominant drivers.”

Fed policymakers are widely expected to deliver a fourth straight supersized interest-rate hike once they meet next week, bringing the policy rate to three.75%-4% as a part of what has been the sharpest set of rate increases in about 40 years.

Brown’s letter didn’t explicitly ask Powell or the Fed to slow or stop rate hikes, though it did urge “continued caution” in light of the synchronized monetary policy tightening by central banks around the globe and Russia’s war in Ukraine amongst other aspects posing the “real possibility of worsening the worldwide economic situation.”

Powell for his part has nodded to those risks and to the likelihood that raising borrowing costs will result in an increase in unemployment, now at a historically low 3.5%.

But he has also argued that beating inflation – running at greater than 3 times the Fed’s 2% goal – is the one approach to ensure long-term labor market strength.

Brown’s letter to Powell comes as his fellow Democrats across the country battle to keep up their razor-thin majority within the Senate, with a very closely watched race in Ohio, Brown’s home state. The elections happen every week after the Fed’s meeting.

Republicans blame Democrats’ pandemic aid and other policies for prime inflation and say they are going to do a greater job with the economy; Democrats have blamed rising prices on greedy corporations and provide chains.

Fed policymakers say the research shows inflation is being driven each by sky-high demand and provide constraints, and that whatever the cause, they’re committed to doing what they’ll to bring it down.

Brown’s letter is unlikely to sway them from that view, though they’re expected to not less than begin talking about slowing rate hikes once they gather Nov. 1-2.

Still, Brown’s missive underscores the political backdrop against which the Fed operates, much as policymakers try to remain out of politics and say their very effectiveness is determined by political independence.

“I ask that you just don’t forget your responsibility to advertise maximum employment and that the selections you make at the subsequent FOMC meeting reflect your commitment to the twin mandate,” Brown wrote.

(Reporting by Ann Saphir; Editing by Aurora Ellis)

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