The Federal Reserve, in its efforts to combat inflation, must be careful not to raise interest rates too quickly and steer the U.S. economy into a recession, according to a key Senate Democrat.
The Fed "is charged with the dual mandate of promoting maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy," said Sen. Sherrod Brown, D-Ohio, chairman of the Senate Banking Committee, in a letter sent Tuesday to Fed Chairman Jerome H. Powell. "It is your job to combat inflation, but at the same time, you must not lose sight of your responsibility to ensure that we have full employment."
The Fed in September hiked interest rates by 75 basis points for the third consecutive meeting, as it looks to slow the economy and tamp down inflation.
So far, job numbers have remained strong; the unemployment rate fell to 3.5% in September, according to data from the Bureau of Labor Statistics published Oct. 7.
While American's household needs such as food, health care and transportation have been strained by high inflation, "A family's 'pocketbook' needs have little to do with interest rates, and potential job losses brought about by monetary over-tightening will only worsen these matters for the working class," Mr. Brown said.
The Federal Open Market Committee's next meeting is Nov. 1-2 and another large rate hike is expected. CME Group's FedWatch tool on Wednesday indicated there is 94% probability that the Fed will increase rates by 75 basis points at its November meeting.
Mr. Brown did not specifically advise the Fed to stop or slow its interest rate hikes, but he warned about potential ramifications if it continues to do so.
"For working Americans who already feel the crush of inflation, job losses will make it much worse," Mr. Brown said. "We can't risk the livelihoods of millions of Americans who can't afford it. I ask that you don't forget your responsibility to promote maximum employment and that the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate."