Democrats are lining up to put pressure on Federal Reserve Chairman Jerome Powell to slow the Fed’s historically large interest rate hikes.
About a dozen liberal lawmakers, led by Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT), pushed Powell and the Fed to back away from their increasingly hawkish monetary policy, arguing that it could cause a recession and job losses across the country.
The Democrats accused Powell in a letter dated Monday of “apparent disregard for the livelihoods of millions of working Americans, and we are deeply concerned that your interest rate hikes risk slowing the economy to a crawl while failing to slow rising prices that continue to harm families.”
JOB OPENINGS JUMP, FRUSTRATING FED HOPES FOR LOWERING INFLATION
The new letter is just the latest effort by Democrats to try to sway the central bank against further rate hikes. Sen. Sherrod Brown (D-OH), chairman of the committee responsible for overseeing the central bank, weighed in last week against the rapidly rising rates, as did Sen. John Hickenlooper (D-CO).
The Fed has a dual mandate: keeping inflation at about 2% and maintaining full employment. It is clear that the central bank lost control of inflation as prices, gauged by the consumer price index, rose a blistering 8.2% in the 12 months ending in September. Meanwhile, the unemployment rate is at a historically low 3.5%.
In their most recent projections, Fed officials said unemployment would rise to 4.4% next year and into 2024, a number that the Warren-led Democrats say implies some 1.2 million people will end up losing their jobs because of the rising rates. The group used the projection to illustrate their fear about how the Fed’s actions will weaken the economy and likely tip it into recession.
The lawmakers also took umbrage at Powell’s comments regarding “pain” that might be felt as a result of the tightening monetary policy. The remarks came during his annual speech in Jackson Hole, Wyoming, over the summer. Powell said that reducing inflation will likely require a sustained period of below-trend growth and that households and businesses will feel some “pain” as a result.
The barrage of missives to Powell is unlikely to sway his approach to conducting monetary policy. Still, Democrats are making their stance clear for posterity and elevating the issue ahead of the midterm elections.
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The Fed is expected to operate outside of external political pressure, something that was evident when former President Donald Trump broke with presidential norms and frequently bashed his appointee in an attempt to pressure the Fed to ease monetary policy.
The Fed will announce its decision on interest rates Wednesday afternoon and is widely expected to raise rates by another 75 basis points, although there is a chance the monetary policy committee shoots higher at 100 basis points or takes a bit more cautious approach and hikes them by only 50 basis points.
