Federal Reserve Chair Jerome Powell speaks at a news conference on July 31, 2024 in Washington, D.C.
The Lights are Flashing Red: The Fed Must Call an Emergency Meeting to Cut Rates
Making people walk an economic tightrope is not the path forward to a healthy economy.
Most people probably aren't thinking about the Federal Reserve's policy decisions on a daily basis. However, they feel the impact of them every day. High interest rates mean that paying down a credit card becomes more expensive, purchasing a home or a car feels out of reach, and the likelihood of losing your job goes up.
For months, the data have been hinting that the Fed's 23-year-high interest rates were starting to take a toll. U.S. household debt has surged to an all-time high, and delinquency is increasingly in the cards. And last Friday, the unemployment rate ticked up to 4.3%, and both employment and wage growth slowed down.
It is clear that the Federal Reserve made a massive mistake in not cutting rates in July. The Fed must call an emergency meeting and cut rates by at least 75 basis points immediately. Failing to do so risks inflicting even more pain on the same people who have borne the brunt of inflation since the pandemic.
Interest rates remain unaccountably high, continuing to put pressure on the well-being of the everyday people who keep our economy going.
Chair Powell has repeatedly expressed commitment to a (completely arbitrary) 2% inflation target. And by all accounts, we are at that target: the three-month annualized Personal Consumption Expenditures price index, the Fed’s preferred measure of inflation, is just 1.5 percent. But interest rates remain unaccountably high, continuing to put pressure on the well-being of the everyday people who keep our economy going.
The Fed's high interest rates are counterproductive, making a large rate cut now ever more urgent. Take housing, for example. The Fed's high interest rates put upward pressure on housing prices. High mortgage rates put homeownership out of reach for prospective buyers, pushing them back into the rental market, and driving up rents. High interest rates also make financing new housing construction more expensive, which means that builders don't build as many new homes. This is especially galling in the midst of a long-standing housing shortage of as many as 7 million homes.
High interest rates also make it more expensive for people to pay down their debts, increasing the likelihood of delinquency. A recent New York Fed report found that early delinquencies on auto loans and credit card debt began rising for low-income borrowers in 2022 and now exceed pre-pandemic levels, and credit card and auto loan balances are the highest they have been since the 2008 financial crisis. This is not just concerning for individuals and households, who face long-term scarring from these periods of financial stress, but also for the economy as a whole.
High interest rates aren't just getting in the way of building more houses and driving people into financial crisis, they're also blunting the impact of historic efforts to tackle climate change. Interest rates are more than double what they were when the Inflation Reduction Act passed. The IRA’s tax credits and subsidies require debt-financed private investment, which companies are eager to pursue. But many of these capital-intensive industries cannot withstand the burden of high rates. In offshore wind, for example, an estimated 60% of cost increases are squarely to blame on high interest rates.
The truth of the matter is that the Fed's sky-high interest rates aren't just making people's lives more difficult and stymieing much-needed investments. Using interest rates to tackle today's inflation also fails to tackle the root causes of the problem.
Today's inflation started because a pandemic collided with a broken supply chain built to maximize profits for the big corporations that designed it over any semblance of resilience and functionality. Those same corporations then hid behind the cover of inflation to jack up prices on consumers, raking in record profits along the way. Research from my organization, Groundwork Collaborative, found that from April to September 2023, corporate profits drove over 50% of inflation.
The Fed's sky-high interest rates aren't just making people's lives more difficult and stymieing much-needed investments. Using interest rates to tackle today's inflation also fails to tackle the root causes of the problem.
Powell himself has admitted that interest rate hikes can't tackle the supply-side issues at the root of today's inflation. And now the data are clear that he is taking the economy to the brink, despite low inflation and rising unemployment.
Making people walk an economic tightrope is not the path forward to a healthy economy. The Fed has a dual mandate to maintain stable prices and full employment. It's time for the Fed to take that mandate seriously and make a large and immediate emergency rate cut.
Urgent. It's never been this bad.
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Most people probably aren't thinking about the Federal Reserve's policy decisions on a daily basis. However, they feel the impact of them every day. High interest rates mean that paying down a credit card becomes more expensive, purchasing a home or a car feels out of reach, and the likelihood of losing your job goes up.
For months, the data have been hinting that the Fed's 23-year-high interest rates were starting to take a toll. U.S. household debt has surged to an all-time high, and delinquency is increasingly in the cards. And last Friday, the unemployment rate ticked up to 4.3%, and both employment and wage growth slowed down.
It is clear that the Federal Reserve made a massive mistake in not cutting rates in July. The Fed must call an emergency meeting and cut rates by at least 75 basis points immediately. Failing to do so risks inflicting even more pain on the same people who have borne the brunt of inflation since the pandemic.
Interest rates remain unaccountably high, continuing to put pressure on the well-being of the everyday people who keep our economy going.
Chair Powell has repeatedly expressed commitment to a (completely arbitrary) 2% inflation target. And by all accounts, we are at that target: the three-month annualized Personal Consumption Expenditures price index, the Fed’s preferred measure of inflation, is just 1.5 percent. But interest rates remain unaccountably high, continuing to put pressure on the well-being of the everyday people who keep our economy going.
The Fed's high interest rates are counterproductive, making a large rate cut now ever more urgent. Take housing, for example. The Fed's high interest rates put upward pressure on housing prices. High mortgage rates put homeownership out of reach for prospective buyers, pushing them back into the rental market, and driving up rents. High interest rates also make financing new housing construction more expensive, which means that builders don't build as many new homes. This is especially galling in the midst of a long-standing housing shortage of as many as 7 million homes.
High interest rates also make it more expensive for people to pay down their debts, increasing the likelihood of delinquency. A recent New York Fed report found that early delinquencies on auto loans and credit card debt began rising for low-income borrowers in 2022 and now exceed pre-pandemic levels, and credit card and auto loan balances are the highest they have been since the 2008 financial crisis. This is not just concerning for individuals and households, who face long-term scarring from these periods of financial stress, but also for the economy as a whole.
High interest rates aren't just getting in the way of building more houses and driving people into financial crisis, they're also blunting the impact of historic efforts to tackle climate change. Interest rates are more than double what they were when the Inflation Reduction Act passed. The IRA’s tax credits and subsidies require debt-financed private investment, which companies are eager to pursue. But many of these capital-intensive industries cannot withstand the burden of high rates. In offshore wind, for example, an estimated 60% of cost increases are squarely to blame on high interest rates.
The truth of the matter is that the Fed's sky-high interest rates aren't just making people's lives more difficult and stymieing much-needed investments. Using interest rates to tackle today's inflation also fails to tackle the root causes of the problem.
Today's inflation started because a pandemic collided with a broken supply chain built to maximize profits for the big corporations that designed it over any semblance of resilience and functionality. Those same corporations then hid behind the cover of inflation to jack up prices on consumers, raking in record profits along the way. Research from my organization, Groundwork Collaborative, found that from April to September 2023, corporate profits drove over 50% of inflation.
The Fed's sky-high interest rates aren't just making people's lives more difficult and stymieing much-needed investments. Using interest rates to tackle today's inflation also fails to tackle the root causes of the problem.
Powell himself has admitted that interest rate hikes can't tackle the supply-side issues at the root of today's inflation. And now the data are clear that he is taking the economy to the brink, despite low inflation and rising unemployment.
Making people walk an economic tightrope is not the path forward to a healthy economy. The Fed has a dual mandate to maintain stable prices and full employment. It's time for the Fed to take that mandate seriously and make a large and immediate emergency rate cut.
- Fed Chair Accused of 'Trying to Get Donald Trump Elected' by Keeping Rates High ›
- Progressives Fume as Fed Holds Working Class Hostage With High Interest Rates ›
- Congressional Progressives to Fed: Cut Rates to 'End This Squeeze' on Workers ›
- Warren Tells Fed Chair Powell to 'Cancel His Summer Vacation' and Cut Rates Now ›
Most people probably aren't thinking about the Federal Reserve's policy decisions on a daily basis. However, they feel the impact of them every day. High interest rates mean that paying down a credit card becomes more expensive, purchasing a home or a car feels out of reach, and the likelihood of losing your job goes up.
For months, the data have been hinting that the Fed's 23-year-high interest rates were starting to take a toll. U.S. household debt has surged to an all-time high, and delinquency is increasingly in the cards. And last Friday, the unemployment rate ticked up to 4.3%, and both employment and wage growth slowed down.
It is clear that the Federal Reserve made a massive mistake in not cutting rates in July. The Fed must call an emergency meeting and cut rates by at least 75 basis points immediately. Failing to do so risks inflicting even more pain on the same people who have borne the brunt of inflation since the pandemic.
Interest rates remain unaccountably high, continuing to put pressure on the well-being of the everyday people who keep our economy going.
Chair Powell has repeatedly expressed commitment to a (completely arbitrary) 2% inflation target. And by all accounts, we are at that target: the three-month annualized Personal Consumption Expenditures price index, the Fed’s preferred measure of inflation, is just 1.5 percent. But interest rates remain unaccountably high, continuing to put pressure on the well-being of the everyday people who keep our economy going.
The Fed's high interest rates are counterproductive, making a large rate cut now ever more urgent. Take housing, for example. The Fed's high interest rates put upward pressure on housing prices. High mortgage rates put homeownership out of reach for prospective buyers, pushing them back into the rental market, and driving up rents. High interest rates also make financing new housing construction more expensive, which means that builders don't build as many new homes. This is especially galling in the midst of a long-standing housing shortage of as many as 7 million homes.
High interest rates also make it more expensive for people to pay down their debts, increasing the likelihood of delinquency. A recent New York Fed report found that early delinquencies on auto loans and credit card debt began rising for low-income borrowers in 2022 and now exceed pre-pandemic levels, and credit card and auto loan balances are the highest they have been since the 2008 financial crisis. This is not just concerning for individuals and households, who face long-term scarring from these periods of financial stress, but also for the economy as a whole.
High interest rates aren't just getting in the way of building more houses and driving people into financial crisis, they're also blunting the impact of historic efforts to tackle climate change. Interest rates are more than double what they were when the Inflation Reduction Act passed. The IRA’s tax credits and subsidies require debt-financed private investment, which companies are eager to pursue. But many of these capital-intensive industries cannot withstand the burden of high rates. In offshore wind, for example, an estimated 60% of cost increases are squarely to blame on high interest rates.
The truth of the matter is that the Fed's sky-high interest rates aren't just making people's lives more difficult and stymieing much-needed investments. Using interest rates to tackle today's inflation also fails to tackle the root causes of the problem.
Today's inflation started because a pandemic collided with a broken supply chain built to maximize profits for the big corporations that designed it over any semblance of resilience and functionality. Those same corporations then hid behind the cover of inflation to jack up prices on consumers, raking in record profits along the way. Research from my organization, Groundwork Collaborative, found that from April to September 2023, corporate profits drove over 50% of inflation.
The Fed's sky-high interest rates aren't just making people's lives more difficult and stymieing much-needed investments. Using interest rates to tackle today's inflation also fails to tackle the root causes of the problem.
Powell himself has admitted that interest rate hikes can't tackle the supply-side issues at the root of today's inflation. And now the data are clear that he is taking the economy to the brink, despite low inflation and rising unemployment.
Making people walk an economic tightrope is not the path forward to a healthy economy. The Fed has a dual mandate to maintain stable prices and full employment. It's time for the Fed to take that mandate seriously and make a large and immediate emergency rate cut.
- Fed Chair Accused of 'Trying to Get Donald Trump Elected' by Keeping Rates High ›
- Progressives Fume as Fed Holds Working Class Hostage With High Interest Rates ›
- Congressional Progressives to Fed: Cut Rates to 'End This Squeeze' on Workers ›
- Warren Tells Fed Chair Powell to 'Cancel His Summer Vacation' and Cut Rates Now ›