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Democratic Senator Sherrod Brown warns the Federal Reserve against attacking inflation so aggressively that it will undo historic gains in the labor market.
“For working Americans, who are already feeling the pressure of inflation, the loss of jobs will make it a lot worse. We cannot risk the livelihoods of millions of Americans who cannot afford it,” Brown, chairman of the powerful Senate Banking Committee, wrote in a letter to Fed Chair Jerome Powell on Tuesday.
The comments from the Ohio Democrat, who publicly backed Powell’s reappointment as Fed Chair, underscore the intense pressure the Fed is facing ahead of next week’s interest rate decision. Republicans have urged the Fed to do more to bring inflation under control, while some Democrats fear the Fed will do too much and trigger a recession.
Brown clearly falls into the latter category, urging Powell to “not forget your responsibility for promoting maximum employment and the decisions you make at the next FOMC meeting [the Federal Open Market Committee, the central bank’s policymaking arm] reflect your commitment to the dual mandate.”
The Fed has been the most aggressive on inflation since the early 1980s. Fed officials are widely expected to hike interest rates by three-quarters of a percentage point next week, marking the fourth straight major rate hike. Bank of America estimates that the US economy will lose 175,000 jobs a month due to the Fed’s rapid rate hikes early next year.
In his letter, Brown reminded Powell of an important point he’s certainly aware of: rate hikes hit the economy with a lag, making it almost impossible to understand their full impact in real time. That means the Fed won’t realize it’s gone too far in its fight against inflation until it’s too late.
“Monetary policy tools take time to reduce inflation by restraining demand until supply catches up—time that working-class families don’t have,” Brown wrote. “We must avoid allowing our near-term progress and strong labor market to be overwhelmed by the consequences of aggressive monetary policy action to lower inflation, especially if the Fed’s actions fail to address their key drivers.”
Some progressives have been more outspoken in their criticism of the Fed. California Rep. Ro Khanna has slammed the central bank for “failed policies” that have led to high inflation and expressed concern that the Fed is now overcompensating.
“I blame the Fed and I blame Powell for handling the situation badly in the first place,” Khanna told CNN in a phone interview earlier this month.
Democratic Massachusetts Sen. Elizabeth Warren has called the Fed’s rate hikes “extreme” and set the stage for blaming the central bank for a slowdown.
“I warned that Chairman Powell’s Fed would put millions of Americans out of work — and I fear he’s already on his way,” Warren said said on Twitter last month.
