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fed rate hikes
Fed Warned to Stop 'Needless Rate Hikes' as Inflation Cools for 10th Straight Month
“The verdict is in: we don't have to choose between low prices and low unemployment. We can have both," said one economist.
May 10, 2023
Progressive economists on Wednesday welcomed newly released U.S. inflation data as further evidence that price increases can be brought under control without crushing the labor market and throwing millions out of work.
But they also warned that the still-strong job market could falter, with devastating consequences for workers, if the Federal Reserve keeps raising interest rates in the coming months.
"The verdict is in: We don't have to choose between low prices and low unemployment. We can have both," said the Groundwork Collaborative's Lindsay Owens after the Labor Department released new data showing that the Consumer Price Index (CPI) rose 4.9% in April compared with the previous year—a cooler figure than analysts expected.
"Today's inflation numbers show 10 straight months of falling inflation on the heels of a 53-year record low unemployment rate," Owens said, referring to last week's better-than-anticipated jobs report. "The only thing left to do now is to ensure that [Fed Chair Jerome] Powell doesn't screw it up with needless rate hikes that would accelerate instability in financial markets and jeopardize our strong labor market."
Heidi Shierholz, president of the Economic Policy Institute, called the new CPI data "good news for working people," noting that "inflation is nearly back to pre-recession rates, while the unemployment rate is at 50-year lows."
The new CPI figures came a week after the Federal Reserve imposed its 10th consecutive interest rate increase since March 2022, ignoring repeated warnings from outside experts, lawmakers, and even the Fed's own economists that the aggressive attempt to slow the economy and tamp down inflation risks a disastrous recession and mass job loss.
During a press conference last week, Powell left the door open to a pause of interest rate hikes at the Fed's June meeting but did not make a firm commitment, pledging only to "be driven by incoming data meeting by meeting."
Progressives advocates and experts, including Owens, have consistently argued for more than a year that interest rate increases—which target economic demand by raising borrowing costs—are the wrong response to inflation driven by many factors beyond the Fed's direct control, from pandemic-induced supply chain snags to corporate profiteering.
While prominent pundits have dismissed the notion that corporate profit-seeking during the pandemic helps explain persistently high inflation in the U.S. and across the globe, mainstream publications such as The Wall Street Journal have determined that progressive economists were right to emphasize big business pricing power as a significant culprit.
"There are signs that companies are doing more than covering their costs," the Journal reported last week. "According to economists at the [European Central Bank], businesses have been padding their profits. That, they said, was a bigger factor in fueling inflation during the second half of last year than rising wages were."
Major companies have used the windfalls from their price hikes to reward investors. The watchdog group Accountable.US noted in a report released Wednesday that Mondelez, which owns Belvita and Chips Ahoy!, "saw a shocking 142% increase in quarterly earnings after announcing price hikes, which empowered it to spend $928 million in dividends and stock buybacks for their wealthiest shareholders."
"It shouldn't come as a shock that Chair Powell’s actions have eroded public trust in the central bank."
A Gallup poll released Tuesday showed that just 36% of U.S. adults have either a "great deal" or a "fair amount" of confidence in Powell, a former private equity executive first nominated to the Fed chairmanship by former President Donald Trump.
President Joe Biden renominated Powell to the critical post in late 2021 despite outspoken opposition from some Democratic lawmakers, including Sen. Elizabeth Warren (D-Mass.).
"The 36% rating for Powell is the lowest Gallup has measured for him during his six years as Fed chair. It is also the lowest reading Gallup has had for any prior Fed chair," the polling organization noted in a summary of its findings.
Owens said in response to the survey that "it shouldn't come as a shock that Chair Powell's actions have eroded public trust in the central bank."
"Instead of fighting for a strong labor market and securing our banking system, Chair Powell has enacted 10 consecutive rate hikes and put us at risk of a recession," said Owens. "Americans want a Fed that is on their side, not the side of big banks."
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Warren, Sanders, and 8 Others to Powell: Stop Hiking Rates or Risk Terrible Recession
"We strongly urge you to respect the Fed's dual mandate, pause your rate hikes, and avoid engineering a recession that destroys jobs and crushes small businesses."
May 03, 2023
Ten lawmakers including progressive Sens. Elizabeth Warren and Bernie Sanders implored the Federal Reserve to impose a pause on interest rate hikes during its Wednesday meeting, warning that further financial tightening in the name of fighting inflation would risk a brutal, job-killing recession.
In a letter to Fed Chair Jerome Powell earlier this week, the members of Congress expressed deep concern that "the Fed risks throwing millions of Americans out of work in its drive to raise interest rates even higher—even as Fed staff have already projected a recession this year amid financial market headwinds and even as you have acknowledged that inflation can slow without destroying the labor market, that the most significant drivers of inflation are not demand-based, and that the economy has not yet experienced the full impact of its earlier rate increases."
"We strongly urge you to respect the Fed's dual mandate, pause your rate hikes, and avoid engineering a recession that destroys jobs and crushes small businesses," they wrote.
The letter was sent amid further evidence that the Fed's aggressive interest rate increases—which are aimed at curbing economic demand by making borrowing more expensive—are taking their toll on the economy, with wage and job growth slowing and layoffs increasing. Recent turmoil in the banking industry, including the failure of several mid-sized banks, has also been tied to the Fed's nine consecutive rate hikes.
On top of worsening economic conditions at home and abroad, the lawmakers wrote in their letter to Powell that "it is even more difficult to justify such aggressive rate hikes at the moment given that inflation over the past six months has already declined significantly, averaging just 3.6% at an annualized rate, compared to 6.4% for the previous six months."
"While the Fed should remain flexible to incoming data as it assesses the economy's progress toward achieving lower inflation, the evidence to date suggests that progress can continue to be made without slamming the brakes on the economy and costing millions of Americans their jobs," the lawmakers continued. "Your recent comments, however, suggest that you remain committed to the idea that millions of workers must lose their jobs in order to bring inflation to heel."
The letter cites Powell's claim during a recent press conference that the economy can't "have a sustainable return to 2% inflation"—the Fed's arbitrary target—"without a better balance in the labor market," Fed-speak for more layoffs.
"Continuing to raise interest rates would be an abandonment of the Fed's dual mandate to achieve both maximum employment and price stability."
Powell has suggested that the Fed can prevent unemployment from rising to disastrous levels, but experts have warned that it is difficult to prevent mass layoffs from spreading once they begin.
The members of Congress echoed that fear in their letter to Powell, writing that "history casts doubt on the Fed's ability to engineer an unemployment rate that just 'rise[s] a bit.'"
"Since World War II, the unemployment rate has never increased by one percentage point within a year outside of a recession: the unemployment rate has increased by one percentage point 12 times since 1945, and in all 12 times that increase has been in the context of a recession," they noted. "And every time the unemployment rate increased by a full percentage point, it continued to increase far beyond that level. The Fed's projections that unemployment will essentially stay level in 2024 after pushing the economy into a recession in 2023, warns an economist concerned with maintaining full employment, 'amounts to a convenient delusion.'"
Warren (D-Mass.), Sanders (I-Vt.), Rep. Pramila Jayapal (D-Wash.), Rep. Brendan Boyle (D-Pa.), and the other letter signatories argued that rate hikes are not the solution to inflationary pressures caused by many factors beyond excessive economic demand—including supply chain shocks and corporate profiteering.
"Continuing to raise interest rates," they wrote, "would be an abandonment of the Fed's dual mandate to achieve both maximum employment and price stability and show little regard for the small businesses and working families that will get caught in the wreckage."
Despite such urgent warnings, the Fed is widely expected to raise interest rates by 25 basis points on Wednesday.
"At the end of its two-day gathering," the Financial Times reported Tuesday, "the Federal Open Market Committee is expected to raise its benchmark policy rate to a new target range of 5-5.25%, the highest level since mid-2007."
Fed-induced economic fears have been compounded by House Republicans' refusal to lift the debt ceiling, obstruction that is pushing the U.S. and global economies to the brink of a devastating crisis.
Rakeen Mabud, chief economist of the Groundwork Collaborative, said Tuesday that "Chair Powell and the Fed have made it clear that high interest rates are here to stay, even if it means trampling on one of the strongest labor markets in history."
"The Fed's actions are heightening the risk of a painful recession and causing instability in financial markets," said Mabud. "If the Fed insists on raising rates again this week, it is jeopardizing the progress we have made towards building a healthier and more inclusive economy for all."
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The Fed Accused of 'Playing With Fire' After Latest Rate Hike
"It shouldn't take a lot of courage to resist another interest rate hike when the economy is this fragile," said one critic.
Mar 22, 2023
Progressive economists and other experts blasted Federal Reserve leadership on Wednesday for raising interest rates yet again despite concerns about recent bank failures and how the quarter-point increase will impact the U.S. and global economies.
"Once again, interest rate hikes are going to fall hardest on low-wage workers and the poor—the same people who have already been hurt the most by rising prices," tweeted University of California, Berkeley professor and former Labor Secretary Robert Reich. "Higher rates could also imperil more banks, and risk even more financial chaos. The Fed is playing with fire."
Fed Chair Jerome Powell told reporters Wednesday that although the Federal Open Market Committee "did consider" a pause on rate increases following the Silicon Valley Bank (SVB) and Signature Bank failures, officials ultimately decided to raise the federal funds rate to a range of 4.75-5%, the highest level since 2007.
"The Fed under Chair Powell made a mistake not pausing its extreme interest rate hikes," declared Sen. Elizabeth Warren (D-Mass.) a fierce critic of nine consecutive rate hikes since last March as well as the Fed's regulatory rollbacks that preceded the bank collapses.
"I've warned for months that the Fed's current path risks throwing millions of Americans out of work. We have many tools to fight inflation without pushing the economy off a cliff," added Warren, who has repeatedly called for ousting Powell.
Patriotic Millionaires chair Morris Pearl—a bank bailout expert and former managing director at BlackRock—similarly contended that "the Fed's decision to keep pushing forward with rate hikes no matter the circumstances is a dangerous mistake."
Describing such hikes as "a blunt instrument," he stressed that high interest rates "are not well suited to the economic realities the country now faces—and will inevitably end up doing more harm than good."
Pearl continued:
In our modern economy, high interest rates are simply not an effective way to fight inflation. Rate hikes have disproportionately hurt just a few sectors, like housing, automobiles, and some banks and investors, while leaving many of the nation's largest employers relatively unscathed.
Rising interest rates do nothing to address a major cause of inflation, corporate price gouging, and actually make another long-term cause, lack of investment in new housing, worse. Instead, the Fed is betting that lowering employment and cooling wage growth is the best solution to inflation.
Higher interest rates may be a cure for inflation, but if they end up causing another banking crisis, or pushing the economy into a recession, the cure may be worse than the disease.
An analysis released Wednesday by Accountable.US explained that "SVB's failure was partly due partly to a 'plunge' in bond value and $1.8 billion in 'paper losses' amid the Fed's rate hikes. By the end of 2022, the Federal Deposit Insurance Corporation (FDIC) had warned that U.S. banks were 'sitting on $620 billion in unrealized losses' that may make their balance sheets appear healthier than they really are."
The watchdog group found that "at the end of 2022, the five biggest U.S. banks—JPMorgan Chase, Bank Of America, Citigroup, Wells Fargo, and U.S. Bank—reported a total of $233 billion in unrealized losses on held-to-maturity securities, including $54 billion in unrealized losses on Treasury securities. These same banks reported a combined $39.4 billion in unrealized losses on available-for-sale securities, including $12.7 billion in losses on available-for-sale U.S. Treasuries."
Liz Zelnick, director of economic security and corporate power at Accountable.US, warned Wednesday that "hiking interest rates, even if more slowly, will devastate Main Street and Wall Street alike by wiping out millions of jobs while sending Treasury securities into a downward spiral," acknowledging that the recent bank turmoil prevented an even bigger increase than 25 basis points.
"A recession and broken financial system are not worth the price of higher interest rates that have failed miserably to curb the corporate greed epidemic helping to drive up costs," Zelnick added. "To date, the Federal Reserve and Chairman Jerome Powell have been more than willing to let average American families bear the brunt of their job-killing strategy—but are they also willing to let their banker friends on Wall Street go down with the ship?"
The Hill highlighted that ahead of Wednesday's announcement, influential figures such as economist Paul Krugman and analysts for Goldman Sachs—in a Monday letter to investors—had advocated for pausing rate hikes.
"Bank stress calls for a pause," wrote Goldman Sachs analysts. "Banking is not just another sector of the economy because financial intermediation is vital to every sector. As a result, addressing stress in the banking system is the most immediate concern and must take priority over other less urgent goals for the moment. We expect that policymakers and staff economists at the Fed will have the same view."
During his Wednesday press conference, Powell insisted that "our banking system is sound and resilient with strong capital and liquidity. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe and sound."
While Powell also emphasized the Fed's commitment to learning from the recent SVB and Signature failures to prevent repeat events, both the bank collapses and a year of rate hikes have fueled calls for his ouster.
Asked by CNN's Jake Tapper on Wednesday whether she had ever directly told President Joe Biden that he should fire Powell, Warren said she wouldn't talk about private conversations "but what I will say is I've made it very clear as publicly as humanly possible that I didn't think that he should be reconfirmed as chair of the Fed. And I think he's doing a really terrible job."
"And he's doing a terrible job on both fronts," she said, referring to the Fed's dual mandate. In terms of oversight, Powell "has spent five years weakening regulations over these multibillion-dollar banks," and on monetary policy, he is "risking pushing our economy into a recession."
"What he's trying to do is get two million people laid off, and one of the things that we need to understand: He wants to raise the unemployment rate by more than a point within a single 12-month period. We have done that before in this country. In fact, we have done it 12 times before. And out of all 12 times, how many times has it resulted in a recession?" she said. "The answer is 12."
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Critics Warn Another Fed Rate Hike Would Be the 'Straw That Breaks the Camel's Back'
One economist slammed the Fed for "protecting wealthy venture capitalists and startup CEOs" while showing "little concern for the millions of people who could lose their jobs."
Mar 21, 2023
Federal Reserve policymakers convened Tuesday for a two-day meeting that will culminate in a decision with major implications for the U.S. and global economies, which have been jarred by recent banking sector chaos and growing fears of a broader financial crisis.
The Fed is widely, though not universally, expected to raise interest rates by 25 basis points on Wednesday despite concerns that the central bank's tightening of monetary policy over the past year is at least partially responsible for the collapse of Silicon Valley Bank (SVB), a top lender to tech startups and venture capital firms.
Rakeen Mabud, chief economist at the Groundwork Collaborative, warned Tuesday that another rate increase would be a huge mistake with potentially devastating consequences that will fall most heavily on vulnerable workers.
The Fed's own projections indicate that millions of additional U.S. workers could face unemployment by the end of the year as the central bank continues to raise borrowing costs and tamp down economic demand.
"While the Federal Reserve wasted no time protecting wealthy venture capitalists and startup CEOs last weekend, it has shown little concern for the millions of people who could lose their jobs as a result of its aggressive rate hikes," said Mabud, who argued another rate hike would "be the straw that breaks the camel's back, sending our economy into a painful—and completely avoidable—recession."
"After the SVB fiasco," Mabud added, Fed Chair Jerome Powell "should not touch rate hikes with a ten-foot pole."
Josh Bivens, chief economist at the Economic Policy Institute, also called for a pause, arguing Monday that the case for halting rate hikes was clear even before SVB failed earlier this month, given recent signs that inflation and wages are cooling substantially.
"It is a genuine problem that interest rate hikes of nearly 5% in a year cause this much distress in the financial sector, indicating a clear failure of bank management and supervision," wrote Bivens, who noted that banks typically benefit from higher interest rates.
"These failures should be addressed going forward," Bivens continued. "But they exist today and the fallout of them clearly provides another argument for standing pat on further rate increases."
"Higher rates reduce inflation only by creating financial crises that crash the economy."
The Fed's policy meeting comes as it is facing mounting criticism over its role in the collapse of SVB and Signature Bank, with lawmakers and experts pointing to the central bank's rollback of post-financial crisis regulations that imposed tougher liquidity requirements on financial institutions with between $50 billion and $250 billion in assets.
"The Federal Reserve is irreparably broken and can no longer be trusted to go it alone on monetary policy," Lindsay Owens, the executive director of the Groundwork Collaborative, said last week. "As Congress works to re-regulate mid-size banks after the misguided 2018 rollbacks... they should also address the rot at the Fed."
In concert with the U.S. Treasury Department and other central banks, the Fed has worked to stem the fallout from the recent bank failures by launching liquidity operations and new lending programs aimed at backstopping the financial industry at home and abroad.
But experts have cautioned that the Fed's efforts to shore up the banking system will be undermined by further interest rate increases, which have proven to be a destabilizing force.
"The Fed has never managed to engineer a soft landing," Yeva Nersisyan, associate professor of economics at Franklin & Marshall College, and L. Randall Wray, professor of economics and senior scholar at the Levy Economics Institute of Bard College, wrote in an op-ed for The Hill late last week.
"The reason is simple: higher rates reduce inflation only by creating financial crises that crash the economy," Nersisyan and Wray explained. "After more than a decade of near-zero interest rates, the Fed hiked rates extremely quickly—by 400 basis points (4 percentage points). All balance sheets that had been built during the period of low rates immediately became toxic."
"What is missing from the debates over monetary policy today is the understanding that the Fed was not established to control inflation," they continued. "It was created to prevent financial crises by acting as a lender of last resort in times of distress. Indeed, that's exactly what the Fed is doing now—opening up its lending facilities to banks in need. But rather than focus on maintaining financial stability, the Fed has become obsessed with controlling inflation, something it cannot really do without causing either a recession or a financial crisis (or both)."
"Put on the crash helmets," the pair concluded. "It's going to be a bumpy landing."
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Majority of US Voters Want the Fed to Stop Raising Rates Before It Tanks the Economy: Poll
"People understand that pushing millions of workers out of a job is a terrible way to address inflation," said one economist.
Mar 06, 2023
Survey data released Monday shows that a majority of U.S. voters want the Federal Reserve to stop raising interest rates before it plunges the economy into recession, a position that aligns with the view of many economists and lawmakers who fear the central bank is on the verge of needlessly throwing millions out of work.
Conducted by Lake Research Partners and published by the Groundwork Collaborative, the new poll found that 56% of U.S. voters believe the Fed should bring its rate hikes to a halt as top central bankers indicate that more increases are coming in the near future—even though rates are already at their highest level in 15 years.
"Our new poll makes it clear that people across the country want the Federal Reserve to stop raising interest rates before it pushes us toward a devastating and completely avoidable recession," said Rakeen Mabud, chief economist at the Groundwork Collaborative.
"People understand that pushing millions of workers out of a job is a terrible way to address inflation and will do nothing to address root causes of inflation like supply-chain interruptions, the war in Ukraine, and big corporations manipulating the market to increase profits," Mabud added. "And they want a Federal Reserve that prioritizes workers and families, not Wall Street and Big Business."
The survey, which reached 1,240 registered voters nationwide, found that just 14% believe the Fed is on the side of "average Americans." Nearly 40% said they feel the central bank serves the interests of big businesses or banks.
"Voters believe overwhelmingly that the Federal Reserve is on the side of Big Business, banks, and Wall Street," Celinda Lake, the president and founder of Lake Research Partners, said during a press call Monday.
The findings were released a day ahead of Federal Reserve Chair Jerome Powell's scheduled appearance before the Senate Banking, Housing, and Urban Affairs Committee, where he will likely face sharp questioning from central bank policy critics such as Sens. Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.).
On Wednesday, Powell is set to testify before the House Financial Services Committee.
The Fed is widely expected to raise interest rates again during its policy meeting later this month, even with inflation easing and despite mounting calls for a pause as previous increases—which are taking a toll on wage growth and the housing market—work their way through the economy.
Powell and other central bankers have repeatedly claimed that the U.S. labor market—which has thus far remained strong in the face of the Fed's rate increases—is running too hot and must be weakened in order to curtail inflation, sparking accusations that the Fed is prioritizing just one side of its dual mandate and "trying to engineer a recession."
The latest U.S. job figures are set to be released on Friday.
Critics have said the Fed's chosen policy approach—aggressive attempts to curb demand—is misguided and will do little to tackle the primary drivers of inflation, including corporate concentration and profit-seeking price increases.
During Monday's press call, economist J.W. Mason argued that "it's absolutely possible for inflation to drop without much job destruction."
"Over the past few months, we've seen a substantial fall in inflation without significant job destruction," said Mason. "You can have disinflation without falling wages and without unemployment. The question is: Are higher interest rates really a tool that can deliver that? I think the answer is no."
The new polling shows that an overwhelming majority of U.S. voters—77%—believe that "we should be focusing on the legislative tools Congress can use to fight inflation instead of simply relying on the Federal Reserve to raise interest rates."
While the survey doesn't mention specific legislative fixes, campaigners and experts have floated a range of proposals over the past year, from a crackdown on Big Oil profiteering to targeted price controls.
Pointing to the public earnings calls of major corporations, Mabud noted Monday that "you don't actually have to look too hard to hear the CEOs being pretty crystal clear that they're jacking up their profit margins by raising prices on consumers."
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Warren Calls For 'Landing the Plane Not Crashing It' After Fed Hikes Rate Despite Cooling Inflation
Another critic warned that "while the Fed continues to stick to their obsession with job-killing interest rate hikes, the livelihoods of working families are on the line."
Feb 01, 2023
Progressive economists and advocates on Wednesday blasted the U.S. Federal Reserve for hiking the federal funds rate an eighth consecutive time despite fears of a recession and impacts on working people.
"With today's rate hike, the Fed is pushing us dangerously close to an unnecessary recession that would spell disaster for low-wage workers, workers of color, and vulnerable communities," the Groundwork Collaborativedeclared. "Workers and families shouldn't have to pay the price for inflation."
The Federal Open Market Committee rose the benchmark interest rate to a range of 4.5%-4.75%. The 25-basis-point increase was the smallest hike since March and came amid signs that the U.S. economy is cooling off.
"Chair Powell should pause his interest rate hikes and remember his dual mandate: Fight inflation without throwing millions out of work."
Fed Chair Jerome Powell said that "while recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path," so "we expect ongoing hikes will be appropriate."
U.S. Sen. Elizabeth Warren (D-Mass.), a major critic of the wave of increases, tweeted that "we want to bring down inflation, but that means landing the plane not crashing it. Chair Powell should pause his interest rate hikes and remember his dual mandate: Fight inflation without throwing millions out of work."
University of California, Berkeley professor and former Labor Secretary Robert Reich explained in a recent video that "the Fed is wrongly obsessing about a wage-price spiral—wage gains pushing up prices—when it should be worried about a profit-price spiral—corporate profits driving up prices."
Longtime opponents of the Fed's strategy on Wednesday renewed calls for not only the U.S. central bank to halt its hikes but also federal lawmakers to get to work battling corporate greed.
Liz Zelnick, director of the Economic Security and Corporate Power program at Accountable.Us, warned that "while the Fed continues to stick to their obsession with job-killing interest rate hikes, the livelihoods of working families are on the line."
"Key indicators show inflation is slowing as our economic recovery remains fragile, which means the Fed's higher rates are only pushing the economy closer to a recession," she said. "Meanwhile, Fed economists have admitted corporations are the real culprit of high costs yet have still refused to relax rate hikes. It's time for the Fed to back down and let policymakers rein in corporate greed rather than risk it all on another rate increase."
Patriotic Millionaires chair Morris Pearl, former managing director at BlackRock, offered a similar critique of Fed policy.
"Today's interest rate hike by the Fed is bad news for the American economy. It's true that raising rates is meant to solve inflation, but that doesn't mean it's the correct course to take right now. Raising rates may cool inflation, but it does so by making everything from mortgages to credit card payments more expensive, which hurts those already suffering the most in today's cost-of-living crisis," he said. "In this case, the cure may be worse than the disease."
"If the federal government is truly committed to slowing inflation without heaping extra pain on the vulnerable, they should go after greedy, ultraprofitable corporations and their C-suite executives," he argued. "Many corporations have used the hype over inflation in recent months to raise prices on consumers and line their pockets. Why else would corporate profits be at a 70-year high?"
"Many corporations have used the hype over inflation in recent months to raise prices on consumers and line their pockets."
Pearl pointed out that "everyone's been complaining lately about how expensive eggs are. The fact that Cal-Maine, the largest egg producer in the U.S., experienced a 10-fold increase in their profits over the last year might just have something to do with it."
As Common Dreams reported last month, Farm Action raised concerns about "apparent price gouging, price coordination, and other unfair or deceptive acts or practices by dominant producers of eggs" and urged the Federal Trade Commission to investigate the sector, "prosecute any violations of the antitrust laws it finds within, and ultimately, get the American people their money back."
Pearl said Wednesday that "the Fed raising interest rates won't do anything to stop corporations like Cal-Maine from exploiting American consumers, unless they raise them so much as to cause a massive rise in unemployment."
"It is hard to see a scenario where this kind of action does not cause immense pain to the worst off in America," he added. "The Fed needs to back off, and let Congress step in to tackle corporate greed."
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As Fed Meets, Experts Tell Powell to Stop 'Needlessly Threatening Jobs'
"There's a clear path forward to avoiding a devastating and completely avoidable recession: Chair Powell and the Fed should stop raising interest rates," said one economist.
Jan 31, 2023
As the Federal Reserve kicked off its first policy meeting of the new year on Tuesday, economists and progressive advocates reiterated their now-familiar call for the central bank to stop raising interest rates amid growing evidence that hiring, wage growth, and inflation are slowing significantly.
"Pushing millions of people out of work is not the answer to tackling inflation," Rakeen Mabud, chief economist at the Groundwork Collaborative, said in a statement. "Additional rate hikes could jeopardize our strong labor market—and low-wage workers and Black and brown workers would suffer the biggest economic consequences."
"There's a clear path forward to avoiding a devastating and completely avoidable recession: Chair Powell and the Fed should stop raising interest rates," Mabud added.
The latest push for an end to interest rate increases came as fresh data released by the U.S. Bureau of Labor Statistics (BLS) on Tuesday showed that wage growth continued to cool at the tail-end of 2022, an outcome that Federal Reserve Chair Jerome Powell has explicitly been aiming for even as experts have rejected the notion that wages are responsible for current inflation levels.
According to the BLS Employment Cost Index (ECI)—a measure watched closely by Fed policymakers—wage growth climbed just 1% in the final three months of 2022 compared to the previous quarter, a slower pace than analysts expected.
"The Fed has lost its excuse for a recession," Mike Konczal, director of macroeconomic analysis at the Roosevelt Institute, tweeted in response to the new BLS figures. "Over the last three months, inflation has come down exactly as a soft landing would predict, wage growth didn't persist but moderated with the reopening to solidly high levels within late 1990s ranges, and the economy added 750,000 new jobs."
"Too many hard-working families have everything to lose if the Fed stays the course with higher rates that only push the economy closer to a recession."
Though Powell has insisted that Fed decision-making will be driven by economic data, he made clear last month that the nation's central bankers don't think inflation has slowed enough to justify a rate-hike pause or reversal, brushing aside the recessionary risks of more monetary tightening.
On Wednesday, the Fed is widely expected to institute a 25-basis-point rate increase followed by another of the same size at its March meeting, bringing the total number of rate hikes to nine since early 2022.
Even the central bank's own models predict a sharp increase in the unemployment rate—and potentially millions of lost jobs—if Fed policymakers drive interest rates up to their desired range of between 5% and 5.25%.
Recent layoffs across the tech industry as well as data signaling a hiring deceleration have also intensified fears of a Fed-induced economic crisis.
"The Fed has every reason to halt further job-killing interest rate hikes as key indicators show inflation is slowing while the economic recovery remains fragile," said Liz Zelnick, director of the Economic Security and Corporate Power program at Accountable.US. "Too many hard-working families have everything to lose if the Fed stays the course with higher rates that only push the economy closer to a recession."
"Repeated interest rate hikes have done little to curb corporate greed that even Fed economists admit is what's really driving high costs on everything from groceries to gas," Zelnick continued. "The Fed faces a choice: back down and let policy and lawmakers continue to take impactful steps to rein in corporate profiteering—or keep needlessly threatening jobs and an economic downturn with further rate hikes.”
For months, economists and lawmakers have vocally questioned the Fed's aggressive rate hikes and laser focus on the labor market given the myriad causes of the 2021 inflation spike, from pandemic-induced supply chain snags to corporate profiteering to Russia's war on Ukraine to the climate crisis.
Some experts, however, have argued that the Fed's seemingly misguided approach is perfectly understandable when considering that a central goal of the institution is to help the rich "conserve and increase their concentrated wealth."
"Chair Jerome Powell and the Fed are willing to impose significant costs on workers and families in order to reduce inflation," Gerald Epstein and Aaron Medlin of the University of Massachusetts Amherst wrote in The American Prospect earlier this month. "This focus on inflation, by promoting high unemployment, contradicts the dual mandate given to the Fed by Congress."
"Why does the Federal Reserve treat its high-employment mandate so cavalierly when inflation is above 2%?" the pair continued. "The answer stems from the fact that since its founding, Fed officials have seen the world through 'finance-colored' glasses. Financiers do not like high inflation. Like all creditors who lend money today to be paid back in the future, financiers hate getting paid back in dollars that are worth less than the dollars they lent out in the first place."
In a blog post on Monday, Economic Policy Institute research director Josh Bivens noted that the Fed's dual mandate is "meant to balance the risks of inflation versus the benefits of fast growth and low unemployment."
"Right now, the benefits of low unemployment are enormous, and the risks of inflation are retreating rapidly," Bivens wrote. "If the Fed lets the current recovery continue apace by not raising interest rates further at this week’s meeting, 2023 could turn out to be a great year for the economic fortunes of American families."
"The Fed should stand pat on interest rate increases," he added. "If they instead insist on raising rates, this will pose a dire threat to what could be an excellent 2023 for the economic prospects of America's working families."
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As Inflation Slows Again, Progressives Tell the Fed Not to 'Drive the Economy Off a Cliff'
"Today's CPI report makes it crystal clear that we don't need mass joblessness to bring down inflation," said one economist.
Jan 12, 2023
Federal data released Thursday showed that the U.S. inflation rate declined in December and slowed to its lowest level in more than a year, prompting a fresh round of calls for the Federal Reserve to pause its interest rate hikes before it needlessly induces mass layoffs.
"Inflation has slowed for six months, providing families more breathing room," said Sen. Elizabeth Warren (D-Mass.), one of the most outspoken critics of Fed policy in Congress. "The Fed needs to take this data into account and not drive the economy off a cliff with more extreme interest rate hikes."
According to the new consumer price index (CPI) figures published by the Bureau of Labor Statistics, inflation fell 0.1% in December compared to the previous month as prices continued to drop or moderate across a variety of sectors, from groceries to used vehicles. (Housing inflation, a lagging indicator, remained elevated in December, but experts expect it to fall in the coming months as the Fed's rate hikes take their toll on the economy.)
At an annualized rate, CPI climbed 6.5% through December, down from 7.1% in November.
"There is no period in which the Fed pursued a deflationary policy in which low-income people won."
"We always need caution when looking at a single month's report, but the good December CPI report follows several months in which inflation has slowed sharply from the pace earlier in the year. All the evidence suggests that the economy is still growing at solid pace," Dean Baker, senior economist at the Center for Economic and Policy Research, wrote in a blog post Thursday.
Baker pointed out that with the latest data, the annualized inflation rate over the last three months was just 1.8%—within the Fed's target rate of 2%.
"It looks like the Fed has largely accomplished its mission of taming inflation, without bringing on a recession," Baker added. "Plenty of things can mess up this picture, like another surge of Covid or an escalation of the war in Ukraine, but for now, the economy is looking very good."
There's also the risk that the Fed—not satisfied with the rate of inflation's decline—continues to aggressively raise interest rates, slamming the brakes on the still-strong economy and potentially throwing millions out of work without tackling many of the primary drivers of price increases, including corporate profiteering.
Rakeen Mabud, chief economist at the Groundwork Collaborative, pointed to that possibility in a statement Thursday, arguing that Fed Chair Jerome Powell "should stop further rate hikes before he engineers a totally unnecessary recession."
"Today's CPI report makes it crystal clear that we don't need mass joblessness to bring down inflation," said Mabud. "Further interest rate hikes will only weaken our economy, and the most vulnerable workers will be the ones to pay the biggest price."
If the minutes from last month's Fed meeting and recent remarks from Powell are any indication, central bank policymakers have no intention of pausing rate hikes at their early February meeting even as their own projections signal potentially massive job losses in the near future—though some officials have expressed support for smaller rate hikes in the coming months.
In a speech on Tuesday, Powell—who has explicitly said he's trying to weaken the labor market and cut workers' wages—declared that "restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy."
Such comments and the policy steps the Fed has over the past year—rapidly driving up interest rates to their highest level in 15 years—have analysts convinced that the central bank is "trying to engineer a recession," which would have disproportionate impacts on low-income workers.
Wage growth and hiring have both slowed in recent months, according to Labor Department data.
"Though they may proclaim otherwise, the Fed is aiming for a recessionary labor market," Alex Williams, a senior economist at Employ America, wrote Monday.
"They might not succeed, they might change their minds, but buried in the Fed's latest projections is a definite—albeit obscured—statement of intent," Williams continued. "The Fed is projecting that the unemployment rate—which reached a low of 3.5% in December—will increase by at least a percentage point (to 4.6%!) by the end of 2023 under 'appropriate monetary policy.' The unemployment rate has only increased by 1% within a year twelve times since World War II. Every time, (1) we saw a recession, (2) the unemployment rate continued to increase far beyond the initial 1%."
"Simple back-of-the-envelope math says that a 1% increase in the unemployment rate represents a net loss of nearly 1.5 million jobs over one year, assuming the Labor Force Participation Rate (LFPR) holds steady," Williams added. "If LFPR falls with employment, as it traditionally has during recessions, the Fed could plausibly be targeting as many as 2 million jobs lost or foregone."
William Spriggs, the AFL-CIO's chief economist, told The New York Times Magazine earlier this week that "if you become unemployed" as a result of the Fed's efforts to tamp down price increases, "then all bets are off, because you can't afford anything."
"There is no period in which the Fed pursued a deflationary policy in which low-income people won," Spriggs said. "The median income of Black families falls, and it takes years to come back. Child poverty spikes."
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'Bad News for Workers' as Wage Growth Slows Amid Fed Rate Hike Barrage
"If the Fed continues with its dangerous interest rate hikes," warned one expert, "we should brace ourselves for more hardship for working people and an unnecessarily painful recession."
Jan 06, 2023
The U.S. Labor Department released data Friday showing that wage and job growth slowed in December as the Fed explicitly targets the labor market and worker pay in its push to tamp down inflation, which has been cooling in recent months.
According to the new figures, wages grew at a slower-than-expected rate of 0.3% last month, and November's hourly earnings number was revised down from 0.6% to 0.4%—a trend that one observer called "bad news for workers."
Pointing to the "huge downward revision to November wage growth," Dean Baker of the Center for Economic and Policy Research wrote, "Hold the rate hikes please."
"Hold the rate hikes please." —Dean Baker, CEPR
While CEO pay has continued to surge, many ordinary workers across the U.S. have seen their wages lag behind inflation as living costs have risen sharply over the past two years.
Elise Gould, an economist at the Economic Policy Institute (EPI), said slowing wage growth is critical for Fed policymakers to consider as they mull additional interest rate hikes, which risk unnecessarily hurling the economy into recession.
"Wage growth decelerated in December no matter how it's measured," Gould noted. "Annualized wage growth between November and December was 3.4%. It is decidedly not driving inflation."
Gould's EPI colleague Heidi Shierholz agreed, describing recent wage growth as "completely non-inflationary."
"By this measure, the Fed's work is done," she wrote on Twitter.
Job growth, meanwhile, remained strong in December even as it cooled compared to the torrid pace of early 2022. The Bureau of Labor Statistics said the U.S. added a better-than-anticipated 223,000 jobs in the last month of 2022, the fifth consecutive month of slowing growth.
The new jobs data comes days after the Fed released the minutes of its mid-December meeting, after which the central bank raised interest rates to their highest level in 15 years despite growing warnings from a range of experts about the potential for a damaging recession and mass layoffs.
According to the minutes, Fed officials are not yet satisfied with evidence showing that inflation is slowing significantly and intend to stay the course with higher rates. Central bankers also suggested they believe the labor market is still too tight and wage growth is too strong, reiterating their goal of "bringing down" the latter even as they admitted there are "few signs of adverse wage-price dynamics."
"You know the Fed's priorities are warped when they suggest too many Americans have jobs," Liz Zelnick, director of the Economic Security and Corporate Power program at the watchdog group Accountable.US, said Friday. "It seems the more Americans find work, the more the Fed embraces job-killing interest rate hikes that disproportionately hurt low-income workers and struggling mom-and-pop shops. And for what?"
"The Fed's single-minded strategy has done little to blunt the real driver of inflation—corporate greed," Zelnick added. "Across industries, corporations continue to mark up prices on working families despite posting record profits and rewarding wealthy investors with billions in giveaways. Raising interest rates only hurts American families in the long run by pushing the economy toward a cliff. Recession is not inevitable, but that depends largely on deliberate decisions made by the Federal Reserve and Chairman Jerome Powell."
Michael Mitchell, director of policy and research at the Groundwork Collaborative, echoed that warning ahead of Friday's jobs report, cautioning that "as workers and families are struggling with higher prices, Chair Powell is hell-bent on bringing down wages and pushing more people out of work with his aggressive interest rate hikes."
"If the Fed continues with its dangerous interest rate hikes," Mitchell said, "we should brace ourselves for more hardship for working people and an unnecessarily painful recession."
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After Latest Fed Rate Hike, Housing Justice Activists Demand Biden Act to Fight Soaring Rents
"Tenants need immediate action from the White House to regulate rent and provide more certainty for millions of people struggling to make ends meet," said one campaigner.
Dec 15, 2022
A grassroots advocacy coalition on Thursday demanded that the Biden administration "address the acute crisis that so many families are feeling today by pursuing rent stabilization policies to stop the skyrocketing cost of housing."
"The Federal Reserve's aggressive interest rate hikes ignore corporate landlords' role in creating and maintaining this crisis."
President Joe Biden "has the authority to take executive action and direct agency-level action to regulate rent," People's Action noted in a new report, entitled The Rent Is (Still) Too Damn High.
"For example," the publication explains, "the president can direct the Federal Housing Finance Agency to impose rent controls on borrowers of federally backed mortgages, which would apply to approximately 43.8 million rental units--immediately slowing down rental inflation."
"Federal agencies also have a role to play," the report continues. "For example, the Department of Housing and Urban Development can work with municipalities, localities, and nonprofit housing providers to incentivize authorities to increase the housing supply, create more mixed-income units, and develop social housing that is kept permanently affordable by its dedicated preservation and capped costs outside of the private market."
Although overall inflation slowed to 7.1% in November--the lowest level since last December--rents are nearly 8% higher now than they were a year ago, according to consumer price index data. That's the biggest single-year increase in 40 years.
"While private rental data on leases may show prices have fallen in recent months, rents are still well above pre-pandemic levels," the People's Action report continues. "The national median rent for a one bedroom is now 21.4% higher than it was just prior to the pandemic in February of 2020, meaning the median renter is paying $205 more per month."
People's Action also took aim at the U.S. Federal Reserve, which on Wednesday raised interest rates for the seventh time this year--a move to slow the economy that experts say disproportionately harms borrowers, retirees, and low-wage workers, and could lead to a recession.
"Rent inflation is a key driver of core inflation," People's Action said, and "the Federal Reserve's aggressive interest rate hikes ignore corporate landlords' role in creating and maintaining this crisis and will hurt tenants."
People's Action Homes Guarantee campaign director Tara Raghuveer said in a statement that "millions of Americans still cannot afford their largest bill every month: the rent. Tenants need immediate action from the White House to regulate rent and provide more certainty for millions of people struggling to make ends meet."
Mike Mitchell, director of policy and research at the Groundwork Collaborative, asserted that "if the Fed triggers a recession, the consequences will be brutal for workers and families already struggling to stay afloat."
"And even with seven consecutive rate hikes," he added, "there is nothing the Fed can do to stop powerful corporate landlords from squeezing as much money as they can out of tenants."
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