America Elections 2024: US lawmakers call on Federal Reserve to begin cutting interest rates

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Senate Budget Committee Chairman Sheldon Whitehouse and House Budget Committee Ranking Member Brendan F. Boyle sent a letter to Federal Reserve Board Chair Jerome Powell ahead of this week’s Federal Open Market Committee (FOMC) meeting, expressing concern over the harmful economic effects of prolonged elevated interest rates and calling on the Fed to begin lowering rates.

The Federal Open Market Committee (FOMC) of the US Federal Reserve is meeting over two days – June 11 and June 12. Fed Chair Powell will make the final announcement on Wednesday, June 12 at 2:00 p.m. ET. to be followed by his press conference. Americans go to vote in the America elections in November 2024.

“Excessively tight monetary policy may jeopardize the strong job market that the U.S. has enjoyed over the last several years,” wrote Chairman Whitehouse and Ranking Member Boyle. “The U.S. economy has achieved an apparent soft landing with inflation falling sharply and continued steady job growth. Lowering rates now will ensure that we do not cause unnecessary and harmful economic damage.”

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In the letter, the lawmakers also warned that elevated interest rates are needlessly raising housing costs for families: “Not only are high rental costs overstating inflation numbers, keeping rates higher for longer will do nothing to solve the housing crisis, and instead may be exacerbating it by increasing the cost of new housing construction, restricting the supply of listings, and making it more expensive for families to buy new homes.”

“We believe that the Federal Reserve must begin to cut rates as soon as the next Federal Open Market Committee meeting. Doing so is warranted by the data, will preserve the economic progress that was so hard fought, and will allow workers and families to enjoy the benefits of a strong economy,” Whitehouse and Boyle concluded.

Chairman Whitehouse has joined Senator Elizabeth Warren (D-MA) and other colleagues to warn of the risks that the Fed’s policy of persistently elevated rates pose to our economy.

Also, U.S. Senator Jacky Rosen joined her Senate colleagues in sending a letter calling on Federal Reserve Chair Jerome Powell to cut federal interest rates as a way to lower the costs of rent, mortgages, and housing construction. The Federal Reserve’s federal funds rate is the highest it has been in two decades.

“The Fed’s current interest rate policy is also having the opposite of its intended effect: it is driving up housing and auto insurance costs, which are currently the main drivers of the overall inflation rate,” wrote the senators. “This housing-related inflation is directly driven by high interest rates: reducing rates will reduce the costs of renting, buying, and building housing, reducing Americans’ single highest monthly expense.”

“The Fed’s monetary policy is not helping to reduce inflation,” they continued. “Indeed, it is driving up housing and auto insurance costs – two of the key drivers of inflation – threatening the health of the economy and risking a recession that could push thousands of American workers out of their jobs. You have kept interest rates too high for too long: it is time to cut rates.”

According to the letter, the Federal Reserve is being urged to cut the federal funds rate from its current, two-decade-high of 5.5 percent.

Furthermore, the European Central Bank (ECB), which like the Fed has a mandate to steer inflation towards a target of 2%, cut interest rates for the first time in five years. It’s time for the Fed to do the same.

Major central banks have cut rates or are leaning towards lowering interest rates. The ECB cut its interest rates on Thursday from 4% to 3.75%. On Wednesday, the Bank of Canada, cut rates becoming the first of Group of 7 central bank to do so. Sweden, Switzerland, Hungary and the Czech Republic have already cut rates. The Fed’s decision to keep interest rates highs continues to widen the rate gap between Europe and the U.S, as the lower interest rates could push the dollar higher, tightening financial conditions.