Congressional Progressive Caucus Urges Caution After Federal Reserve Raises Interest Rates

Representative Pramila Jayapal (WA-07), chair of the Congressional Progressive Caucus, responded to an announcement from the Federal Reserve that interest rates would be raised 0.75 percent:

“With the Federal Reserve’s pace of monetary tightening now the fastest in decades, I have serious concerns that President Biden’s promise to ‘grow the economy from the bottom up and the middle out’ is now at risk. We are all concerned about the impact of inflation and rising costs, but today’s decision to raise interest rates will do nothing to address their primary causes. Chairman Powell himself has rightly pointed out that these are in fact related to the pandemic, supply-chain disruptions, and the war in Ukraine — that supply constraints, not excess demand, are responsible for persistent inflation.

“By hiking interest rates to deliberately slow the economy, the Fed could cause hardship to millions of Americans by unnecessarily increasing joblessness, while failing to significantly reduce the price of essential goods and services. These rate hikes also threaten to deter companies from making the investments needed to expand the economy’s productive capacity. At a time when the Biden administration has been working to reach full employment — creating nearly 9 million jobs and decreasing unemployment to among its lowest levels in 50 years — raising interest rates risks reversing that trend, and could force employers to lay off employees who just got back to work, or slow hiring altogether. Just as the burden of high costs is not borne equally, so is the impact of interest rate hikes. Full employment allows for much-needed income gains, particularly within the bottom spectrum of wage earners — and during high unemployment, disadvantaged, lower-paid, and Black and Latino workers are disproportionately harmed. 

“As Congressional Democrats work to lower drug prices and health care premiums for Americans, I urge the Federal Reserve to exercise the utmost caution going forward and resist the urge to further raise interest rates. With wage growth declining in recent months, our country’s lowest-paid, most vulnerable workers have endured too much already to be sacrificed in pursuit of severe rate hikes that have far too often triggered recessions.”

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