Two prominent Senate Democrats this week are calling on Federal Reserve Chairman Jerome Powell to exercise caution when it comes to the central bank’s string of interest rate hikes.
Ohio Sen. Sherrod Brown, the chairman of the Senate Banking Committee, and Colorado Sen. John Hickenlooper, who himself is a small business owner, each sent letters to Powell urging the agency not to be overzealous when it comes to fighting inflation.
“For the first time in decades, we have seen historic job growth, and workers have begun to see wage gains, gains that your prior actions to stabilize the economy helped achieve,” wrote Brown, who earlier this year backed Powell for a second term as Fed chair. “Yet, many workers and their families are struggling under the weight of inflation.”
“Maintaining full employment while reducing inflation is central to protecting the workers who power our economy,” he added.
Two days later, Hickenlooper wrote a letter of his own to Powell, noting that while “high inflation necessitates a response,” there are concerns that “the Fed is doing too much too soon” and that the central bank should “wait to see the effects on the economy and how those changes are absorbed.”
The Fed has rapidly raised interest rates in an attempt to slow down the economy and drive down inflation, which has reached four-decade highs. The letters come a week before the Fed’s monetary policy committee, the Federal Open Market Committee, is set to meet in Washington, where policymakers are expected to announce another rate hike.
Hickenlooper called raising rates “the Fed’s bluntest tool” to combat rising inflation, adding that “it has wielded that hammer repeatedly.”
“However, after five straight rate increases by the Fed, I worry any additional action will undermine economic growth and harm American families,” Hickenlooper wrote Thursday, adding: “Raising rates now when prices may come down would be foolish and damaging to American consumers and small businesses.”
News of Hickenlooper’s letter was first reported by CNN. Unlike Hickenlooper, Brown did not explicitly call on the central bank to cease raising rates, but rather expressed concern that the Fed may be moving too quickly without analyzing the impact of its actions.
"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, adding: "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."
The Ohio Democrat also said that there is a "strong chance" that central banks around the world simultaneously raising rates to address inflation "will amplify each other and produce greater than intended consequences."
"This risk of combined policy response and uncertainty from exogenous events, such as Russia’s illegal war against Ukraine and the anti-competitive actions by cartels like OPEC, creates the real possibility of worsening the global economic situation," Brown added. "Protecting the world’s most vulnerable populations and avoiding disruption that further increases the global wealth gap requires your continued caution."
While Chairman Powell has faced criticism from fellow members of the Democratic party, like progressives Rep. Ro Khanna, D-Calif., and Elizabeth Warren, D-Mass., the Federal Reserve divorces its monetary policy actions from politics. President Joe Biden has emphasized the need for the Fed to act independently, a departure from the stance of his predecessor.
"My plan to address inflation starts with the simple proposition: Respect the Fed, respect the Fed's independence, which I have done and will continue to do," Biden said in a meeting with Powell earlier this year.