After the latest consumer price index update signaled cooling inflation, the Federal Reserve's interest rate-setting committee on Wednesday temporarily paused hikes, an approach that progressive economists and others want the panel to continue.
The Federal Open Market Committee confirmation that, as expected, it will keep the federal funds rate at 5-5.25% follows 10 consecutive hikes since early 2022 that have increasingly generated concerns of a recession and major job losses.
University of California, Berkeley professor and former Labor Secretary Robert Reich is among the fierce critics of recent rate hikes.
"The Federal Reserve is pausing interest rate hikes for the time being. Good," Reich said Wednesday. "As interest rates have risen to 'cool' the economy, who do you think has shouldered the burden? Working people. There's no reason to continue punishing them when they aren't to blame for inflation."
U.S. Sen. Elizabeth Warren (D-Mass.) has also repeatedly raised alarm about the increases since last year and welcomed the newly announced pause while urging a long-term shift in strategy.
"With inflation falling by more than half since last summer, the Fed has finally heeded calls to halt its extreme rate hikes," she tweeted. "The Fed raised interest rates at the fastest pace in decades and it needs to maintain this pause or risk throwing millions of Americans out of work."
Groundwork Collaborative chief economist Rakeen Mabud, another longtime opponent of the Fed's rate-hiking, said in a statement Wednesday: "Inflation is down and the job market remains strong. We never had to choose between lower prices and a strong labor market."
Mabud urged Powell to "concede that you don't have to destroy the labor market to bring down prices," which she said "starts with not only skipping today's rate hike, but permanently halting this dangerous rate-hiking campaign."
Meanwhile, Groundwork Collaborative executive director Lindsay Owens highlighted a piece from Intelligencer's Eric Levitz which declares that Harvard University economist and former Treasury Secretary Larry Summers "was wrong about inflation."
"Larry Summers was right to anticipate impending inflation in February 2021. But from the beginning, his analysis was predicated on the idea that excessive stimulus would lead to unsustainably low unemployment and thus wage-driven inflation," Levitz explained. "There has never much reason to believe that the labor market was the primary driver of post-Covid price growth. And at this point, it's abundantly clear that, in 2023 America, a tight labor market will not inevitably trigger a wage-price spiral. We do not need to put millions of people out of work in order to contain inflation. Larry Summers was wrong to say otherwise."
Sharing the Intelligencer analysis on Twitter, Owens and Mabud's group wrote that "Larry Summers presented us with a false choice between strong labor markets and inflation. Groundwork said it then and we'll say it again: We never had to choose."
Despite progressive experts' demands for an end to interest rate hikes, Federal Reserve officials are projecting two more quarter-point increases this year. According toThe Associated Press, Fed Chair Jerome Powell told reporters Wednesday that "given how far we have come, it may make sense for rates to move higher but at a more moderate pace."
Throughout the rate-hike campaign, critics have called out Powell and others for ignoring how corporate greed is driving inflation. The Hillnoted that during the Wednesday press conference, he did not mention "the role that profits are playing in the current phase of inflation, despite mentions of 'unusually high' profits in the latest anecdotal summary of U.S. economic conditions in the Fed's beige book."
