Sen. Warren and Congressman Lynch Call out Monetary Policymakers As Being Too Aggressive
With analysts expecting the Federal Reserve to raise interest rates again on Wednesday, Sen. Elizabeth Warren and Congressman Stephen Lynch are calling out the monetary policymakers for being too aggressive and putting the jobs of Americans at risk.
Warren and several of her colleagues wrote a Halloween letter to Federal Reserve Chair Jerome Powell asking for answers about the Fed’s recent economic projections, its plans to continue raising interest rates, and the impacts of rate increases that are meant to bring down soaring inflation.
Specifically, Warren and 10 Congressional colleagues are questioning rate hikes that could send U.S. unemployment up from 3.7 percent to 4.4 percent next year, Fed plans to soften labor market conditions and warnings from the Fed of “pain” associated with higher rates and slower growth.
In the letter that was also signed by Sen. Bernie Sanders of Vermont, Warren cited economists from the left and the right who say the Fed is “braking the economy too hard” by raising interest rates by 3 percentage points since March — “the fastest increase of that size since 1982” — and projecting additional rate hikes this year and into 2023.
Rate hikes have limited impacts on “supply chain snarls, corporate price gouging, and the war in Ukraine,” as well as on food and energy prices, the lawmakers said, adding that private forecasters project the monetary policy path will push joblessness past the Fed’s 4.4 percent forecast.
“Bank of America expects that unemployment will peak at 5.6 percent, implying a nearly 2 percentage-point jump in the unemployment rate over the next year and the loss of more than 3 million jobs,” the lawmakers wrote. “A recent survey of economists forecasts a 63 percent probability that the U.S. will enter into a recession in the coming 12 months, with 60 percent of the forecasters surveyed agreeing that ‘the Fed will raise interest rates too much and cause unnecessary economic weakness,’ up from 46 percent in July. Bloomberg Economics’ forecast projects that the probability of recession in the next 12 months has grown to 100 percent. According to a Bank of America analyst, ‘[t]he market thinks the Fed’s economic forecasts are an unrealistic fantasy.'”
The lawmakers gave Powell two weeks to respond to a series of questions about expected job losses under the Fed’s unemployment projections and the expected impacts of those jobs losses broken down by wage quartile, race, sex, educational attainment and sector.
