Federal Reserve Board Chair Jerome Powell holds a news conference after the Fed raised rates of interest by 1 / 4 of a percentage point following a two-day meeting of the Federal Open Market Committee on rate of interest policy in Washington, March 22, 2023.
Leah Millis | Reuters
WASHINGTON — A bunch led by several distinguished Democratic lawmakers is looking on the Federal Reserve to halt rate hikes to avoid risking an excessive amount of damage to the economy.
The ten senators and representatives, led by Sen. Elizabeth Warren of Massachusetts and Reps. Pramila Jayapal of Washington and Brendan Boyle of Pennsylvania, raised their concerns in regards to the Fed’s monetary policy strategy and its “potential to throw thousands and thousands of Americans out of labor,” in a letter Monday to Fed Chair Jerome Powell.
The letter was sent ahead of the Fed’s anticipated rate hike announcement Wednesday. It could be the tenth increase since last 12 months, because the central bank has tried to tame inflation. Some expect the Fed to pause hikes after Wednesday.
The lawmakers called on the Fed to suspend rate hikes to “respect” its dual mandate and “avoid engineering a recession that destroys jobs and crushes small businesses.”
During a Feb. 1 press conference, Powell said he continues to think “that there is a path to getting inflation back right down to 2% with out a really significant economic decline or a major increase in unemployment,” though he also noted that the majority economic forecasters would predict an uptick.
“While we don’t query the Fed’s policy independence, we imagine that continuing to boost rates of interest could be an abandonment of the Fed’s dual mandate to attain each maximum employment and price stability and show little regard for the small businesses and dealing families that may get caught within the wreckage,” the lawmakers wrote.
Seven other senators and members of the House also signed the letter addressed to Powell.
The benchmark federal funds rate is the best since 2007 after nine consecutive rate increases by the Fed since last 12 months. The failures of Silicon Valley Bank and Signature Bank in March — combined with the “lagging impacts of the Fed’s earlier rate hikes” — have also left the U.S. economy “much more vulnerable to an overreaction by the Fed,” the lawmakers wrote.
Additionally they cited the bottom year-over-year consumer price index in nine months, a resilient labor market and a 3.5% unemployment rate, including the bottom rate for Black Americans on record, as proof that further rate hikes are unnecessary.
Successive rate hikes would “needlessly” threaten that progress, they argued.
“While the Fed should remain flexible to incoming data because it assesses the economy’s progress toward achieving lower inflation, the evidence so far suggests that progress can proceed to be made without slamming the brakes on the economy and costing thousands and thousands of Americans their jobs,” the lawmakers wrote.
With a purpose to gauge the Fed’s latest economic projections, the lawmakers requested an inventory of knowledge points, including expected trends for wage growth and economic forecasts for the unemployment rate over the following 12 months, by May 15.
