Nearly two dozen progressive Democrats from the House and Senate called on the Federal Reserve to cut interest rates at its scheduled meeting this week.
Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) joined Rep. Pramila Jayapal (D-Wash.) and 20 more House Democrats on Monday arguing there is no longer any need for high interest rates, which have made consumer loans difficult to afford.
“With core inflation already having come into line with the Federal Reserve’s target, today’s excessively contractionary monetary policy needlessly worsens housing market imbalances and the unaffordability of home ownership, creates risks for banking stability, and could threaten the achievements of strong employment and wage growth and its attendant reductions in economic and racial inequalities,” the lawmakers wrote.
The Fed is slated to meet Tuesday and Wednesday. It has increased interest rates in 11 meetings since March 2022 in an effort to fight quickly climbing inflation, cranking the rate to 5.33 percent in July 2023 and keeping it steady since.
The high rates have spurred a similar increase in mortgage, auto loan and credit card rates, while corporate buyers also complain of a slow money market.
Annual inflation has decreased to about 3.2 percent as of February, according to the Department of Labor, down significantly from its July 2022 high of nearly 9 percent, but still below the Fed’s 2 percent target.
The progressives argue the 2 percent target will forever remain elusive, urging the Fed to go against market predictions that it will hold rates at current levels until a slight drop this fall.
“The American economy recovered from COVID because congressional Democrats and President Biden partnered to invest in workers over corporations and created paths to economic security for people who had been locked out before,” Jayapal said in a statement.
“Unnecessarily high rates put all that at risk. They will only punish everyday Americans: exacerbating the housing crisis, hindering the deployment of clean energy, and throwing the future of the Biden recovery into uncertainty, while threatening the wages and jobs that our communities depend on,” she added. “It’s past time for the Fed to end this squeeze on working- and middle-class families.”
The lawmakers said home affordability is their chief concern. They also warn that failing to cut interest rates will hurt workers.
“The more realistic concern in light of these labor-market trends is that the Federal Reserve may wait too long to lower rates and allow tight monetary policy to reduce employment and real wage growth,” they wrote.
Jayapal also invited members of the Fed’s Board of Governors to speak with Congressional Progressive Caucus members to discuss monetary policy.
The letter follows a similar call, also led by Warren, from a more ideologically diverse group of Democratic senators in January.