Federal Reserve Bank Board Chairman Jerome Powell

U.S. Federal Reserve Bank Board Chairman Jerome Powell answers reporters' questions during a news conference in Washington, D.C. on November 2, 2022.

(Photo: Chip Somodevilla/Getty Images)

Progressive Economists Warn of 'Catastrophic Outcomes' for Workers as Fed Hikes Interest Rates

"Memo to the Fed: Interest rate hikes aren't working because inflation is being driven by corporations using it as cover to price gouge the people," argued former U.S. Labor Secretary Robert Reich.

As the U.S. Federal Reserve on Wednesday raised interest rates--the fourth consecutive 0.75% increase and the sixth hike of the year--progressives stressed that Fed policy boosts the likelihood of a global recession and disproportionately harms low-income workers and other marginalized people.

"Working people should not be the target of lowering inflation, it should be corporations that are earning record profits."

Fed Chair Jerome Powell explained that the move was necessary to ease inflation, which has hit a 40-year-high due to factors including corporate profiteering, Russia's invasion of Ukraine, and the climate emergency.

"We've always said it was going to be difficult," he said, "but to the extent rates have to go higher and stay higher for longer it becomes harder to see the path" to avoiding recession.

"I would say the path has narrowed over the course of the last year," Powell added.

Progressive economists and activists refuted the Fed's approach.

Accountable.US spokesperson Liz Zelnick noted in a statement that "a chorus of economic experts have warned hiking interest rates again is a recipe for millions of Americans receiving pink slips, yet the Fed has decided to triple down on what is not working."

"Throughout the pandemic, the Fed should have been acting as stewards of the fragile economic recovery but instead have prioritized demands from big banks, hedge funds, and other Wall Street special interests at the great expense of average working families," she contended.

"If excessive interest rate hikes hasten the arrival of an otherwise avoidable recession, will the Fed take responsibility," added Zelnick, "or try to pass the buck as they keep making matters worse?"

AFL-CIO president Liz Shuler said the Fed's latest rate hike "will have a direct and harmful impact on working people and our families" and "will not address the underlying causes of inflation."

"The Fed seems determined to raise interest rates, though it openly admits those rates could ruin our current economy as unemployment remains low and people are able to find jobs," she continued. "A recession would instead cause companies to hire fewer people, making it harder for young workers, workers of color, and others who have greater barriers finding jobs, and put downward pressure on the wages of all working people who will bear the brunt of an overactive monetary policy."

"Working people should not be the target of lowering inflation," Schuler added, "it should be corporations that are earning record profits."

Anticipating Wednesday's rate hike, Groundwork Collaborative chief economist Rakeen Mabud argued Tuesday that the move is a "misguided policy with catastrophic outcomes for the millions around the country who are already struggling to make ends meet."

"The Fed's rate-hiking frenzy is doing everything but lowering prices," she said. "Wage growth is slowing and mortgage rates are the highest in 20 years. If Powell wants to be taken seriously as a responsible steward of the economy, he should think twice before raising rates again."

Progressive former U.S. Labor Secretary Robert Reich tweeted: "Memo to the Fed: Interest rate hikes aren't working because inflation is being driven by corporations using it as cover to price gouge the people."

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