U.S. Senate Banking Committee Chair Sherrod Brown on Tuesday advised Federal Reserve Chair Jerome Powell to be careful about tightening monetary policy so much that millions of Americans already hit by soaring inflation also became jobless.
Brown said in the letter, also addressed to the Fed’s Board of Governors and disclosed publicly by Brown’s office:
“It is your job to combat inflation, but at the same time, you must not lose sight of your responsibility to ensure that we have full employment. We must avoid having our short-term advances and strong labor market overwhelmed by the consequences of aggressive monetary actions to decrease inflation, especially when the Fed’s actions do not address its main drivers.”
Fed policymakers are largely expected to implement a fourth successive supersized interest-rate rise when they meet next week, bringing the policy rate to 3.75%-4% as part of what has been the sharpest set of rate hikes in about four decades.
Brown’s letter did not directly ask the Fed or Powell to slow or halt rate increases, though it did urge “continued caution” in view of the coordinated monetary policy tightening by central banks worldwide and Russia’s invasion of Ukraine among other factors causing the “real possibility of worsening the global economic situation.”
Powell for his part acknowledged those risks and the probability that hiking borrowing costs will lead to an increase in unemployment, currently at a historically low 3.5%. But he has also recommended that beating inflation – running at more than three times the Fed’s 2% goal – is the only way to guarantee long-term labor market strength.
Brown’s letter to Powell comes as his fellow Democrats across the country fight to hold on to their razor-thin majority in the Senate, with a particularly closely monitored race in Ohio, Brown’s home state. The elections occur a week after the Fed’s meeting.
Republicans criticize Democrats’ pandemic aid and other policies for soaring inflation and say they will do a better job with the economy; Democrats have blamed surging prices on supply chains and greedy corporations.
Buy Crypto NowFed policymakers say the research indicates inflation is being driven both by soaring demand and supply constraints, and that regardless of the cause, they are devoted to doing what they can to curb it. Brown’s letter is unlikely to bend them from that view, though they are expected to at least start talking about slowing rate increases when they meet on Nov. 1-2.
Still, Brown’s missive spotlights the political backdrop against which the Fed operates, much as policymakers attempt to keep out of politics and say their very effectiveness is hinged on political independence.
Brown wrote:
“I ask that you don’t forget your responsibility to promote maximum employment and that the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate.”
