Fed Chair Jerome Powell

U.S. Federal Reserve Bank Chair Jerome Powell announces that interest rates will remain unchanged during a news conference at the Federal Reserve's William McChesney Martin building on June 12, 2024 in Washington, D.C.

(Photo: Kevin Dietsch/Getty Images)

Progressives Fume as Fed Holds Working Class Hostage With High Interest Rates

"The last thing Americans need right now is another threat to their wallets from the Fed," said one Democratic congressman.

As the U.S. Federal Reserve again declined to lower its interest rate, progressive economists, politicians, and activists on Wednesday implored the Fed to throw working-class Americans a lifeline by implementing multiple rate cuts this year.

Fed officials said after a meeting Wednesday that while inflation has fallen toward target levels, they only envision one rate cut for the rest of this year—down from the three cuts they previously projected. The Fed rate currently stands at 5.25%-5.5%.

The Associated Pressreported:

The scaled-back estimate for rate cuts came as something of a surprise, given that the government reported earlier Wednesday that consumer inflation eased in May more than most economists had expected. That report suggested that the Fed's high-rate polices are succeeding in taming inflation.

"You know who is going to bear most of the pain of the Fed's policy?" former U.S. Treasury Secretary Robert Reich asked in a video posted to social media on Wednesday. "Not powerful corporations that are ratcheting up prices to pad their profit margins. Not corporate executives, not Wall Street, not the wealthy, and not the upper middle class."

"Most of the pain will be borne by lower-wage workers and the poor," Reich continued. "Researchers at the [International Monetary Fund] estimate that the unemployment rate may need to reach 7.5%—double its current level—to end America's inflation crisis. This would be about 6 million job losses. And low-wage working people will take it on the chin because they are usually the first to be fired."

"Rent prices are still high and are the main driver of inflation now," Reich said in a separate post on Wednesday, as Accountable.US released a report on corporate landlords' soaring profits. "Just so happens that recent investigations have found evidence of algorithmic price fixing by major corporate landlords. High interest rates won't fix this."

Other economists and economic justice advocates agreed.

"Only one rate cut this year would be a major misstep," said Bilal Baydoun, director of policy and research at the Groundwork Collaborative, a progressive economic think tank. "Families need relief from high borrowing costs now. [Fed Chair Jerome] Powell is making it harder for families to get by."

Moody's Analytics chief analyst Mark Zandi said on social media: "While this morning's consumer price inflation report for May probably overstates the disinflation case, it makes a strong case that inflation is headed back to the Fed's inflation target."

"All the trend lines look good," Zandi added. "It is time for the Fed to cut rates."

Key members of Congress this week also called on the Fed to slash interest rates for the sake of working Americans.

Congressman Brendan Boyle (D-Pa.), the ranking member on the House Budget Committee, said in a statement Wednesday that "holding rates too high for too long poses a grave risk to American workers."

"With the GOP pushing extreme plans that cut Social Security benefits, slash food assistance programs, and raise costs for families, the last thing Americans need right now is another threat to their wallets from the Fed," he added.

Earlier this week, Sens. Elizabeth Warren (D-Mass.) , Jackie Rosen (D-Nev.), and John Hickenlooper (D-Colo.) wrote to Powell urging interest rate cuts.

"The Fed's monetary policy is not helping to reduce inflation. Indeed, it is driving up housing and auto insurance costs—two of the key drivers of inflation—threatening the health of the economy and risking a recession that could push thousands of American workers out of their jobs," the senators noted in a letter to the Fed chair. "You have kept interest rates too high for too long: It is time to cut rates.

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