Economy

Fed’s Powell urges to protect jobs by Stocksak, as he approaches the next rate hike

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© Stocksak. FILEPHOTO: Federal Reserve Board Chairman Jerome Powell hosts an “Fed Listens” event at the Federal Reserve, Washington, U.S.A. September 23, 2022. REUTERS/Kevin Lamarque

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(Stocksak). Tuesday’s U.S. Senate Banking Committee Chair Sherrod brown urged Jerome Powell, Federal Reserve Chair, to be cautious about tightening monetary policies so that millions of Americans already struggling with high inflation do not lose their jobs.

Brown wrote that “It is your responsibility to combat inflation, but at a same time, it is your responsibility to ensure we have full employment.” The letter was also addressed to the Fed Board of Governors. Brown’s office released the letter publicly. “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.”

Fed policymakers are expected to announce a fourth consecutive supersized interest rate hike next week. This will bring the policy rate to 3.75%-4.4% in what has been the sharpest set rate increases in over 40 years.

Brown’s letter to Powell and the Fed did not ask them to slow or stop rate increases. However, it did urge caution in light the Fed’s synchronized tightening of monetary policies around the world as well as Russia’s war in Ukraine.

Powell, for his part, has acknowledged these risks and the possibility that increasing borrowing costs will lead increase unemployment, which is currently at 3.5%.

He also believes that beating inflation – which is running at three times the Fed’s target of 2% – is the only way for long-term labor market strength.

Brown’s letter to Powell comes at a time when his fellow Democrats across America are fighting to maintain their razor thin majority in the Senate. Brown’s home state of Ohio is closely watched, and Brown’s letter to Powell. The elections will take place one week after the Fed meeting.

Republicans blame Democrats for high inflation through pandemic aid and other policies. They claim they will do a better job managing the economy. Democrats blame rising prices on greedy corporations, supply chains, and corporate greed.

Fed policymakers claim that inflation is driven by both sky-high demand as well as supply constraints. They are determined to do everything they can to reduce it.

Brown’s letter won’t change their view. However, they can expect to start to talk about slowing down rate hikes at their Nov. 1-2 meeting.

Brown’s missive still highlights the political background against which Fed operates. Policymakers are careful to avoid politics and insist on their political independence.

“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,” Brown wrote.

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