Fed Urged to Quickly Slash Rates as Powell Warns of 'Downside Risks to Employment'
"Let's be clear: The Fed has all the data it needs to cut rates now—and it's past time to deliver relief for the American people," said the Groundwork Collaborative.
Federal Reserve Chairman Jerome Powell admitted during a closely watched speech Friday that the central bank's decision to keep interest rates high for an extended period has increased the risk of a labor market downturn, which could threaten the jobs and livelihoods of millions of U.S. workers.
After holding the federal funds rate steady at 5.25% to 5.50% for more than a year—even as economists and lawmakers warned of the harmful impacts on working-class Americans, the housing market, and the broader U.S. economy—Powell conceded Friday that "the time has come for policy to adjust," a strong signal that the Fed will cut rates at its September meeting.
"The inflation and labor market data show an evolving situation," Powell said in his remarks in Jackson Hole, Wyoming, the site of what's been described as "the world's most exclusive economic get-together."
"The upside risks to inflation have diminished," the Fed chair continued. "And the downside risks to employment have increased."
"The direction of travel is clear," he added, "and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."
The Fed's high interest rates are pushing people into debt and making life unaffordable for millions of families
Powell's remarks came two days after the U.S. Labor Department issued a significant downward revision of the nation's job growth estimates for 2023 and early 2024, heightening concerns that the Fed has waited too long to reduce interest rates. In the 12 months that ended in March 2024, the U.S. added around 818,000 fewer jobs than the Labor Department previously believed, according to the new figures.
"Let's be clear: The Fed has all the data it needs to cut rates now—and it's past time to deliver relief for the American people," the Groundwork Collaborative, a progressive think tank, said Friday in response to Powell's speech.
In a Thursday statement, Groundwork chief economist Rakeen Mabud called on the Fed to cut interest rates by "at least 75 basis points" at its meeting next month.
"The Fed's high interest rates are pushing people into debt and making life unaffordable for millions of families," said Mabud. "The biggest threat to the economy is not inflation, it's the Fed."
Bharat Ramamurti, senior adviser for economic strategy at the American Economic Liberties Project and former deputy director of the White House National Economic Council, also implored the Fed to "move quickly" on interest rate reductions "to avoid unnecessary harm to workers."
Inflation has fallen dramatically in the U.S. since it peaked at 9.1% in June 2022, but the Fed opted during its latest policy meeting last month to keep interest rates at a two-decade high for the 12th consecutive month.
The decision prompted the Revolving Door Project (RDP), a progressive watchdog group, to accuse Powell of succumbing to political pressure from Republican nominee Donald Trump and other Republicans who have warned the Fed chair to keep rates elevated until after the November elections.
Trump originally nominated Powell in 2017, and President Joe Biden decided to renominate the Fed chair for another four-year term despite progressive opposition.
Jeff Hauser, RDP's executive director, said earlier this week that "with the possible exception of Attorney General Merrick Garland, Federal Reserve Chair Jerome Powell is the worst appointee in President Joe Biden's administration."
"The sad irony is that Biden didn't have to renominate a Republican private equity executive to lead the Fed in 2022; in fact, we implored him not to," said Hauser. "Our concerns about Powell's ethical shortcomings, fickle commitment to full employment, and fealty to deregulation have, sadly, been borne out by his actions."
"Should she win the upcoming election," Hauser added, "Democratic presidential nominee Kamala Harris must heed the lessons of the Powell era and nominate a central bank leader without compromising ties to Wall Street who is dedicated to maximizing employment and strengthening financial regulation."
