As the Federal Reserve enters another crucial rate-setting meeting, lawmakers are reminding the central bank how high the stakes are.
In a letter sent Monday to Fed Chairman Jerome Powell, Democratic senators expressed concern over the Fed’s plan to continue raising interest rates at an “alarming rate” and “the ominous warning from Powell to American families” that they should expect to suffer in the months ahead.
Democrats, including Sen. Elizabeth Warren, Sen. Bernie Sanders and Rep. Katie Porter, pointed to comments from economists who fear the Fed is acting too aggressively to crush inflation. They pointed to a recent United Nations warning of a central bank-fueled global recession.
The letter represents the latest effort by Democrats to push back against the Fed’s inflation-fighting efforts. Colorado Sen. John Hickenlooper warned last week that it would be “foolish” for the Fed to continue raising rates.
Facing the worst inflation in four decades, the Fed is raising interest rates at the fastest rate since the early 1980s. The campaign crushed the stock market, pushed mortgage rates to 20-year highs and fueled recession fears.
Still, the lawmakers note that Powell himself admitted the Fed couldn’t fix the supply-side issues that have driven up food and energy prices.
“There’s a lot of things that we can’t affect, and those would be, you know… the commodity price issues that we’re having around the world because of the war in Ukraine and the fallout from that,” he said. Powell said at a press conference in June. conference.
The Fed has signaled that its war on inflation will likely lead to job losses, a point Democrats detailed in the letter. Last month, the Fed predicted that the unemployment rate would rise from just 3.5% today to 4.4% next year.
Democrats have asked Powell to answer a series of questions by Nov. 14 about the economic pain Americans should prepare for.
Noting the Fed’s new unemployment forecast, lawmakers asked, “How many job losses, in millions, does the Fed estimate this forecast would imply?”
Lawmakers asked the same question of potential job loss based on Bank of America’s projections for an even higher unemployment rate of 5% in 2023. They also want Powell to detail the breakdown of job losses by sector, sex, race, level of education and salary. quartile.
“Has the Fed seen evidence that its monetary policy actions have priced in recession expectations among market participants and consumers?” lawmakers asked.
In many ways, the Fed finds itself in an almost impossible situation: to control inflation without causing a slowdown.
Powell said last month that no one knew if the Fed’s inflation fight would cause a recession, or how deep it would be. But he pointed out that letting inflation run wild would create an even worse situation.
“We committed to bringing inflation down to 2%,” Powell said, “because we believe a failure to restore price stability would cause much greater pain later.”