Sen. Elizabeth Warren said on Sunday that she is “extremely concerned” about an imminent recession in the wake of Federal Reserve Chairman Jerome Powell’s hawkish comments on Friday that suggested interest rates would eventually rise much higher.
The Massachusetts Democrat expressed his concern to CNN’s Dana Bash, saying, “I’m really frightened that the Fed is going to throw this country into recession.”
Warren continued, “There is nothing in raising interest rates, nothing in Jerome Powell’s tool bag that deals directly with those.
The causes of inflation, things like the fact that COVID is still shutting down portions of the economy around the world, that we still have supply chain kinks, that we still have a war in Ukraine that drives up the cost of energy, and that we still have these massive corporations that are engaging in price gouging.
What is even worse than high prices and a robust economy? There are millions of individuals without jobs and excessive costs.
During a conference in Jackson Hole, Wyoming, Powell predicted that interest rates would continue to rise “sharply” for a while as the Fed tried to control persistently high inflation.
Powell said that delivering price stability was “our unequivocal obligation” and that it would “take some time.”
Despite a swift succession of big interest rate rises that have brought the Fed’s policy rate from almost zero to 2.5 percent, inflation has been running high and held close to a 40-year high at 8.5 percent in July.
The consumer price index for July was somewhat lower than the high rate of 9.1 percent for June.
But according to Powell, who was speaking in reference to the Federal Open Market Committee, the central bank’s policy-making body, “a single month’s improvement falls well short of what the Committee will need to observe before we are convinced that inflation is going down.”
Powell forewarned that price controls would have an impact on Americans.
In highly anticipated comments at the Kansas Federal Reserve’s Jackson Hole, Wyoming conference, he said: “While higher interest rates, slower growth, and tougher labour market conditions will bring down inflation, they will also bring some pain to consumers and companies.”
What the Fed may do at its forthcoming policy meeting on September 20-21 was not suggested by Powell. Either a 75-basis-point or 50-basis-point rate rise is anticipated from officials.
The Fed chair vowed to battle price hikes “vigorously” until they fell back to their two percent objective.
The personal consumption expenditure price index, the Fed’s favoured measure of inflation, was 6.8% in June and 6.3 percent in July.
The price index dropped by 0.1 percent on a monthly basis, which was a greater drop than experts had anticipated.