Because the Federal Reserve kicks off one other pivotal rate-setting meeting, lawmakers are reminding the central bank exactly just how high the stakes are.
In a letter sent Monday to Fed Chair Jerome Powell, Democratic senators expressed concern in regards to the Fed’s plan to proceed raising rates of interest at an “alarming pace” and Powell’s “disturbing warning to American families” that they need to expect pain in the approaching months.
The Democrats, including Sen. Elizabeth Warren, Sen. Bernie Sanders and Rep. Katie Porter, highlighted comments from economists who worry the Fed is moving too aggressively to squash inflation. They pointed to a recent warning from the United Nations of a central bank-fueled global recession.
The letter represents the newest effort by Democrats to beat back on the Fed’s inflation-fighting efforts. Colorado Sen. John Hickenlooper warned last week it could be “silly” for the Fed to maintain raising rates.
Faced with the worst inflation in 4 many years, the Fed is lifting rates of interest on the fastest pace because the early Nineteen Eighties. This campaign has crushed the stock market, spiked mortgage rates to 20-year highs and fueled recession fears.
Yet the lawmakers note that Powell himself has conceded the Fed can’t cure the supply-related problems which have lifted food and energy prices.
“There are a lot of things we will’t affect, and people can be, you recognize…the commodity price issues that we’re having world wide attributable to the war in Ukraine and the fallout from that,” Powell said during a June press conference.
The Fed has signaled that its war on inflation will likely create job losses, a degree the Democrats chronicled intimately within the letter. Last month, the Fed projected the unemployment rate will climb from just 3.5% today to 4.4% next 12 months.
The Democrats asked Powell to reply by Nov. 14 to a series of questions on just how much economic pain Americans needs to be bracing for.
Noting the Fed’s new unemployment forecast, the lawmakers asked: “In response to the Fed’s estimates, what number of job losses, in tens of millions, would that forecast imply?”
The lawmakers asked the identical query of potential job loss based on Bank of America’s projection for a fair higher unemployment rate of 5% in 2023. Additionally they want Powell to detail the breakdown of job loss by sector, gender, race, educational attainment and wage quartile.
“Has the Fed seen evidence that its monetary policy actions have embedded expectations of recession amongst market participants and consumers?” the lawmakers asked.
In some ways, the Fed finds itself in an almost inconceivable situation: Taming inflation without causing a downturn.
Powell said last month that nobody knows if the Fed’s inflation fight will cause a recession, or how deep that recession is perhaps. But he stressed that letting inflation run amok would create a fair worse situation.
“We’re committed to getting inflation back right down to 2%,” Powell said, “because we predict that a failure to revive price stability would mean far greater pain afterward.”