U.S. Sen. Sherrod Brown on Tuesday reminded Federal Reserve Chair Jerome Powell of the central bank's legal obligations to all Americans, particularly working-class people, amid a wave of recent interest rate hikes that critics say ignore the root causes of inflation.
"It is your job to combat inflation, but at the same time, you must not lose sight of your responsibility to ensure that we have full employment."
The Ohio Democrat, who chairs the Senate Committee on Banking, Housing, and Urban Affairs, sent a letter to Powell amid expectations that the Federal Open Market Committee (FOMC) will approve another rate hike at a meeting next week—despite mounting criticism of the approach.
Highlighting that the Fed "is charged with the dual mandate" under U.S. law, Brown wrote to Powell that "it is your job to combat inflation, but at the same time, you must not lose sight of your responsibility to ensure that we have full employment."
"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," he noted. "Yet, many workers and their families are struggling under the weight of inflation."
Citing Powell's remarks last month about inflation impacting middle- and lower-income households, the senator stressed that "the Federal Reserve's tools work to lower inflation by reducing demand for economic activities sensitive to interest rates. However, a family's 'pocketbook' needs have little to do with interest rates, and potential job losses brought about by monetary over-tightening will only worsen these matters for the working class."
Given that higher-income families "are better able to protect their wealth during economic downturns," Brown explained, "inflation and recessionary job losses increase the gap between upper- and lower-income households and widen the divide between racial groups."
"While, for now, the labor market remains relatively stable, we are starting to see job openings decrease and unemployment claims rise," he continued. "We must stay focused on addressing the root causes of inflation without putting workers' livelihoods at risk."
The senator's letter also emphasizes some key drivers of inflation that aren't impacted by rate hikes, from the effects of the Covid-19 pandemic and Russia's invasion of Ukraine, to the fact that "big corporations in concentrated industries have exploited this inflationary environment, increasing consumer costs and earning higher profit margins than before."
While celebrating efforts by Congress to tackle some root causes of current conditions—including passage of the Inflation Reduction Act and ocean shipping reforms—the letter also flags that other central banks are increasing interest rates, which could ultimately worsen the global economic situation.
"Protecting the world's most vulnerable populations and avoiding disruption that further increases the global wealth gap requires your continued caution," Brown warned Powell. "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," the letter concludes. "I ask that you don't forget your responsibility to promote maximum employment and that the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate."
The think tank Groundwork Collaborative welcomed the senator's letter.
"For months, Groundwork and our allies have been sounding the alarm that the Fed's aggressive rate hikes—the wrong tool to take on the root causes of today's inflation—will crush workers and harm families scraping to get by," the group tweeted.
Groundwork on Tuesday also collected some "strong reporting" on recent debates over how to fight inflation and critiques of the Fed's approach from various economists and progressives in Congress.
One of the featured articles, published by Marketplace earlier this month, featured a stark warning from Groundwork executive director Lindsay Owens.
"I think Powell's interest rate bender has us on the precipice of global recession," she said. "He is really going hard on rate hikes. And the consequences could be tremendous for so many."
This content originally appeared on Common Dreams - Breaking News & Views for the Progressive Community and was authored by Jessica Corbett.
Jessica Corbett | Radio Free (2022-10-25T22:38:39+00:00) Sherrod Brown Warns Fed Chair That Rate Hikes Put Working-Class ‘Livelihoods at Risk’. Retrieved from https://www.radiofree.org/2022/10/25/sherrod-brown-warns-fed-chair-that-rate-hikes-put-working-class-livelihoods-at-risk/
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