Democratic Senator Sherrod Brown has warned the Federal Reserve not to attack inflation so aggressively that it undoes historic progress in the labor market.
“For American workers who are already feeling the pinch of inflation, the job losses will be far worse. We cannot risk the livelihoods of millions of Americans who cannot pay,” Brown, the chairman of the powerful Senate Banking Committee, wrote in a letter to Fed Chairman Jerome Powell on Tuesday.
The comments from the Ohio Democrat, who publicly endorsed Powell’s nomination as Fed chairman, underscore the high pressure on the Fed ahead of next week’s decision on interest rates. Republicans have called on the Fed to do more to control inflation, while some Democrats fear the Fed will do too much and trigger a recession.
Brown clearly falls into the latter category, urging Powell not to “forget your responsibility to promote maximum employment and the decisions you will make at the next FOMC meeting.” [the Federal Open Market Committee, the central bank’s policymaking arm] reflect your commitment to dual mandate.’
The Fed is taking its most aggressive stance against inflation since the early 1980s. Next week, Fed officials expect to raise interest rates by three-quarters of a percent, making it the fourth straight increase. Bank of America estimates that 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 of an important point he’s sure to be familiar with: interest rate hikes affect the economy with a lag, and it’s nearly impossible to understand their full impact in real time. That means the Fed won’t know it’s gone too far in its fight against inflation until it’s too late.
“Monetary policy tools take time to reduce inflation by limiting demand until supply rises, which working-class families don’t have,” Brown wrote. “We must avoid letting our short-term gains and strong labor market be overwhelmed by the effects of aggressive monetary action to reduce inflation, especially when the Fed’s actions do not address its key drivers.”
Some progressives have been more explicit in their criticism of the Fed. Rep. Ro Khanna of California blasted the central bank for “failed policy” that led to high inflation and expressed concern that the Fed will now overcompensate.
“I blame the Fed and I blame Powell for mishandling the situation,” Khanna told CNN in a phone interview earlier this month.
Massachusetts Democratic Senator Elizabeth Warren described the Fed’s rate hikes as “extreme” and set the stage for blaming the central bank for the downturn.
“I have warned that Chair Powell’s Fed would put millions of Americans out of work, and I fear it is already well on its way,” Warren. he said on Twitter last month.