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U.S. lawmakers publicly write to Powell asking the Fed to set a clear timetable for interest rate cuts

2024-03-20

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On Monday (March 18) local time, independent U.S. Senator Bernie Sanders, Democratic Senator Elizabeth Warren and more than 20 members of the House of Representatives publicly wrote to Federal Reserve Chairman Powell, asking him to formulate a plan for the central bank to cut interest rates. schedule. They stressed that the current excessively tight monetary policy has led to harmful economic consequences.

The letter states that the Fed’s inflation target of close to 2% has basically been achieved, as evidenced by the bank’s preferred inflation indicator, the personal consumption expenditures (PCE) price index. They added that inflation has shown no signs of accelerating recently, with wage growth approaching pre-COVID-19 rates and productivity gradually rising, which will further ease inflationary pressures.

"With inflation already in line with the Fed's goals, current overly tight monetary policy has unnecessarily exacerbated imbalances in the housing market and housing affordability, posed risks to banking sector stability, and could threaten strong employment and wages. Prospects for growth, and progress toward reducing economic and racial inequality.”

Lawmakers wrote that the housing market is facing serious imbalances as a result of persistently high interest rates, making home ownership unaffordable. New housing starts are down nearly 20% from April 2022 levels, existing home sales have fallen to a 30-year low, down 18.7% from 2022, and mortgage rates have increased from 3% to 7%.

“In the financial sector, we remind you that the collapse of Silicon Valley Bank a year ago occurred against the backdrop of high interest rates continuing to impact the balance sheets of small and medium-sized banks.” The letter stated, “We are concerned that the recent rise in unemployment and The harmful economic slowdown may be caused by the lagged effects of 11 rate hikes since March 2022."

In March 2022, the Federal Reserve entered a rapid interest rate hike cycle and completed 11 interest rate hikes. The cumulative rate of interest rate hikes was as high as 525 basis points. The federal funds rate also rose from 0%-0.25% to 5.25%-5.50%, reaching 22 The highest level in years and continues to this day.

Within a few days, the Federal Reserve began to hold a two-day monetary policy meeting and will announce a resolution at 02:00 a.m. Beijing time on Thursday (March 21). CME Group's "Fed Watch" tool shows that the market believes that the probability of the bank "holding no action" is 99%.

With the March meeting unlikely to see an interest rate cut, federal lawmakers wrote, "we ask you (Powell) to set a timely timetable for future rate cuts." They believe this move will provide a clearer picture to the outside world. guidance and play a role in calming financial markets.

Lawmakers also believe that the Fed's interest rate cuts are best started at the May FOMC meeting, which will ensure a strong labor market and continue to weaken wage inequality. "We look forward to your response and welcome discussions with Congress." Progressive Caucus' members for further discussion."

On the same day, Senator Warren also mentioned in another open letter that high interest rates "have completely undermined major renewable infrastructure projects in the United States" and hindered the country's ability to respond to the climate crisis. This letter also asked the Federal Reserve to Cut interest rates as soon as possible.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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U.S. lawmakers publicly write to Powell asking the Fed to set a clear timetable for interest rate cuts

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