Warren and Jayapal urge the Fed to stop raising interest rates

Federal Reserve Chairman Jerome Powell holds a press conference after the Federal Reserve raised interest rates by a quarter of a percentage point following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, March 22, 2023.

Leah Mellis | Reuters

A group led by several prominent Democratic lawmakers has called on the Federal Reserve to halt interest rate hikes to avoid risking significant damage to the economy.

The 10 senators and representatives, led by Sen. Elizabeth Warren of Massachusetts and Representatives Pramila Jayapal of Washington and Brendan Boyle of Pennsylvania, raised concerns about the Federal Reserve’s monetary policy strategy and “the possibility of putting millions of Americans out of work.” In a letter on Monday to Federal Reserve Chairman Jerome Powell.

The message was sent ahead of the Fed’s expected rate hike announcement on Wednesday. It would be the tenth increase since last year, as the central bank tried to rein in inflation. Some expect the Fed to pause increases after Wednesday.

Lawmakers called on the Fed to suspend rate hikes to “respect” its dual mandate and “avoid engineering a jobs-destroying recession that crushes small businesses.”

During a press conference on February 1, Powell said he still believes “there is a way to get inflation back to 2% without a significant economic decline or a significant increase in unemployment,” though he also noted that most economic forecasters would. Expect a slight uptick.

“While we do not question the Fed’s policy independence, we believe that continuing to raise interest rates would be tantamount to abandoning the Fed’s dual mandate to maximize employment and price stability and to show little concern for the small businesses and working families that would get it,” they signed. in the wreckage,” the lawmakers wrote.

Seven other senators and members of the House of Representatives also signed the letter to Powell.

The benchmark federal funds rate is the highest since 2007 following nine consecutive rate increases by the Federal Reserve since last year. The failures of Silicon Valley and Signature Bank in March — combined with the “late effects of the Fed’s early rate hike” — left the US economy “more vulnerable to an overreaction by the Fed,” the lawmakers wrote.

They also point to the lowest year-over-year consumer price index in nine months, a flexible labor market and an unemployment rate of 3.5%, including the lowest rate for black Americans ever, as evidence that price increases are unnecessary.

They argued that successive increases in interest rates would “needlessly” threaten this progress.

“While the Fed must remain flexible to incoming data as it assesses the economy’s progress toward achieving lower inflation, the evidence so far suggests that progress can continue without reining in the economy and costing millions of Americans their jobs.” Lawmakers wrote.

In order to gauge the Fed’s latest economic projections, lawmakers requested a list of data points, including projected trends for wage growth and economic projections for the unemployment rate over the next year, by May 15.

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