WASHINGTON — Sen. Elizabeth Warren took purpose on the Federal Reserve’s inflation-fighting sport plan on Sunday, saying she was apprehensive the central financial institution will tip the U.S. economic system right into a recession.
“Do you know what’s worse than high prices and a strong economy?” the Massachusetts Democrat requested on CNN’s “State of the Union.” “It’s high prices and millions of people out of work. I’m very worried that the Fed is going to tip the economy into recession.”
Warren renewed her criticism of Fed Chair Jerome Powell’s financial tightening insurance policies, saying she doesn’t imagine rising rates of interest can comprise present inflationary pressures.
“Things like the fact that COVID is still shutting down parts of the economy around the world, that we still have supply chain kinks, that we still have a war going on in Ukraine that drives up the cost of energy,” Warren mentioned. “There is nothing in raising interest rates, nothing in Jerome Powell’s toolbag, that deals directly with those.”
Powell, in a extremely anticipated speech from Jackson Hole, Wyoming, on Friday, signaled the Fed was going to proceed its aggressive sequence of rate of interest hikes, and maintain charges elevated for a time, to attempt to tamp down demand and get inflation beneath management.
“These are the unfortunate costs of reducing inflation,” Powell mentioned in a high-profile speech on the Fed’s annual financial symposium in Jackson Hole. “But a failure to restore price stability would mean far greater pain.”
Powell’s remarks prompted a sell-off on Wall Street, the place the Dow coughed up 1,008.38 factors to shut at 32,283.40. The final time the blue-chip common had a 1,000-point drop was in May.
Warren mentioned his feedback point out that jobs might be misplaced and small companies damage.
Fed officers and their European counterparts, additionally coping with decades-high inflation, are pushing again in opposition to options they may reverse course if their economies falter whereas value pressures stay too excessive.
“The historical record cautions strongly against prematurely” reducing rates of interest, Powell mentioned. “We must keep at it until the job is done.”
Atlanta Fed President Raphael Bostic instructed Bloomberg Television final week the economic system has to weaken first earlier than inflation begins to maneuver down, and that such a shift would usually require the Fed to carry charges at larger ranges for 18 months to 2 years.
An evaluation by the Federal Reserve Bank of New York discovered {that a} majority of U.S. pandemic-era inflation got here from a surge in demand and a transfer away from providers to items, however provide chain constraints similar to employee shortages and logistics bottlenecks stoked it additional.
Source: www.bostonherald.com”