Democratic Sen. Sherrod Brown is warning the Federal Reserve not to attack inflation so aggressively that it undoes the historic progress in the jobs market.
“For working Americans who already feel the crush of inflation, job losses will make it much worse. We can’t risk the livelihoods of millions of Americans who can’t afford it,” Brown, chairman of the powerful Senate Banking Committee, wrote in a letter sent to Fed chairman Jerome Powell on Tuesday.
The comments from the Ohio Democrat, who publicly supported Powell’s renomination as Fed chair, underscore the intense pressure facing the Fed ahead of next week’s decision on interest rates. Republicans have urged the Fed to do more to get inflation under control, while some Democrats are concerned the Fed will do too much and spark a recession.
Brown clearly falls into that latter category, urging Powell not to “forget your responsibility to promote maximum employment and that 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 is making its most aggressive stand against inflation since the early 1980s. Next week, Fed officials are widely expected to lift interest rates by three-quarters of a percentage point, marking the fourth straight jumbo-sized rate hike. Bank of America estimates the US economy will start losing 175,000 jobs a month early next year due to the Fed’s rapid interest rate hikes.
In his letter, Brown reminded Powell about an important point of which he is surely aware: Interest rate hikes hit the economy with a lag, making it nearly impossible to understand their full impact in real time. That means the Fed won’t know that it has gone too far with its fight against inflation until it’s too late.
“Monetary policy tools take time to reduce inflation by constraining demand until supply catches up — time that working-class families don’t have,” Brown wrote. “We must avoid having our short-term advances and strong labor market overwhelmed by the consequences of aggressive monetary actions to decrease inflation, especially when the Fed’s actions do not address its main drivers.”
Some progressives have been more explicit in their criticism of the Fed. California Rep. Ro Khanna slammed the central bank for “failed policy” that led to high inflation and expressed concern the Fed will now overcompensate.
“I blame the Fed and I blame Powell for mismanaging the situation in the first place,” Khanna told CNN earlier this month in a phone interview.
Massachusetts Democratic Sen. Elizabeth Warren has described the Fed’s rate hikes as “extreme” and set the stage for blaming the central bank for a downturn.
“I’ve been warning that Chair Powell’s Fed would throw millions of Americans out of work — and I fear he’s already on the path to doing so,” Warren said on Twitter last month.