U.S. Senator Elizabeth Warren says she is “very worried” that the Federal Reserve will tip the economy into recession. “There is nothing in raising the interest rates, nothing in Jerome Powell’s tool bag that deals directly with” the causes of inflation, she explained.
Senator Elizabeth Warren on Inflation, Fed Raising Interest Rates
U.S. U.S. discussed inflation and the Federal Reserve raising interest rates during an appearance on CNN’s State of the Union Sunday.
Her first comment was on Friday’s speech in Jackson Hole by Jerome Powell, Chairman of the Federal Reserve. “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. This is the unfortunate cost of decreasing inflation. But a failure to restore price stability would mean far greater pain,” Powell said.
“I want to translate what Jerome Powell just said,” the senator from Massachusetts said. “What he called ‘some pain’ means putting people out of work, shutting down small businesses because the cost of money goes up, because the interest rates go up.”
Replying to a question about whether she believes it’s a mistake for the Federal Reserve to keep raising interest rates, Warren stressed:
This is very concerning to me.
She proceeded to list “The causes of inflation — 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, and that we still have these giant corporations that are engaging in price gouging.”
Senator Warren emphasized:
There is nothing in raising the interest rates, nothing in Jerome Powell’s tool bag that deals directly with those, and he has admitted as much in congressional hearings when I’ve asked him about it.
She continued: “Do you know what’s worse than high prices and a strong economy? It’s high prices and millions of people out of work. I’m very worried that the Fed is going to tip this economy into recession.”
The National Association of Business Economics published a poll last week showing that 72% of economists expect the U.S. to enter recession in the middle of next fiscal year. According to the National Bureau of Economic Research, nearly one-fifth (19%) of economists polled believed that the U.S. economy was already in recession.
Stifel Financial conducted a different survey and found that 97% (including business executives) believed the U.S. was in recession already (18%) or would face it within the next 18 month (79%).
Elon Musk, CEO of Tesla believes that inflation is at its peak. Meanwhile, JPMorgan CEO Jamie Dimon said there is a chance of “something worse” than a recession coming.
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