The Federal Reserve has aggressively raised interest rates since March last year to combat higher inflation. While the central bank has managed to tame inflation somehow, the rate hikes have also slowed economic activity, with some even warning that it could cause a recession.
For this reason, a group of Democratic lawmakers has sent a letter to Fed Chair Jerome Powell, calling on the agency to halt rate hikes to avoid risking too much damage to the economy.
Senators Urge Fed to Stop Raising Rates
10 US senators and representatives, including prominent politicians like Senators Elizabeth Warren, Representatives Pramila Jayapal, and Brendan Boyle, have sent a letter to Powell before the Federal Open Market Committee meeting. The group has urged the central bank to halt rate increases to protect American jobs and small businesses.
The letter said additional rate hikes could “throw millions of Americans out of work.” The lawmakers cited a low year-on-year consumer price index rate, a resilient labor market, and a particularly low rate of unemployment among African-Americans as evidence that further hikes are unwarranted.
“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 Fed has been tightening its monetary policy by rapidly raising rates over the past year to tame high inflation. From near zero, the central bank has brought its benchmark target range to between 4.75% and 5%.
Analysts Expect Fed to Stop Hikes After Wednesday
Some analysts expect the Fed to pause hikes after Wednesday. BlackRock’s head of global fixed-income, Rick Rieder, said that a surprisingly early debt-ceiling deadline and the regional bank woes of Signature Bank and Silicon Valley Bank would not hold back the Fed from raising rates on Wednesday.
He suggested that a 25 basis-point rate increase to a target range of 5-5.25% was likely. Rieder added that this would be followed by an extended pause allowing the previous hikes to take effect.
However, Rieder predicted that recent bank failures would result in a credit contraction and slower progress on inflation, suggesting the Fed was reaching the end of its current cycle of rate increases. He claimed that rate cuts were possible in 2024 or even as soon as December 2023.
Rieder noted that markets were correctly responding to fears of smaller banks reducing lending and face increased capital requirements after debt assets on their balance sheets fell under pressure following the Fed’s aggressive rate hikes.
He also claimed that he sees “a reasonable chance” the US could fall into “a shallow recession,” adding that he expects that the first half of 2023 “is going to look pretty good” before a “tangible slowdown” in the second half of the year.
Today at 2:00 PM ET, the Fed will announce its decision on interest rates. If the central bank proceeds with another rate hike, it would be the 10th increase since last year. Notably, the benchmark federal funds rate is already the highest since 2007.
This article originally appeared on The Tokenist
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