The Federal Reserve projected that 2 million people will be out of work before the end of the year under the current policy, set up to curb inflation. There’s a looming fight about the debt ceiling and how to avert the impending crisis.
Federal Reserve chair Jerome Powell testified in front of the Senate Banking Committee this week. Powell said that inflation hurts all working people in the U.S., and that the Fed is “taking the only measures we have to bring inflation down.” He also stated that the central bank could raise interest rates more aggressively if inflation numbers stay high.
Democratic Sen. Elizabeth Warren of Massachusetts pressed him about the projection. She asked Powell, “Putting 2 million people out of work is just part of the cost? And they just have to bear it?”
3 questions with Sen. Elizabeth Warren
Were you satisfied with Powell’s response to questions about the projection?
“Let’s remember, the Federal Reserve has what’s called a dual mandate: two jobs. One is to deal with inflation, and the other is employment. And the idea that you just throw workers under the bus in order to try to bring down inflation, that’s not what the law says. And it’s a very worrisome approach for the chair of the Federal Reserve.
“I raised this in particular because there are many factors contributing to high prices. We know, for example, that price gouging is part of it. We know that the war in Ukraine, we know that supply chain kinks, all have contributed to high prices. None of those are going to be solved by raising interest rates.”
What are the alternatives to raising interest rates?
“I’d go much more aggressively after the price gouging. So, for example, we already know that in the industries where there’s the most concentration, that is, where there’s not much competition, their prices have gone up the fastest and the profit margins have increased the most. That means there is a place for our federal government to bear down on those industries and make clear that price gouging is not something we’re going to put up with.”
What do you say in terms of the debt ceiling and Republican plans to use it to force budget cuts?
“Republicans are not just saying debt ceiling default, which is a real problem. They’re saying that the price for their ransom is you’ve got to make these extreme cuts in the federal budget.
“Moody’s not only did an analysis of what happens if we trigger the debt ceiling default, they also looked at what happens if we do the Republican cuts. And the answer there is it will plunge the economy into a recession and put 2.6 million people out of work. So what we have to say as Democrats is, ‘Republicans are trying to put the economy between a rock and a hard place, and we’re not going to do that.’”
Gabrielle Healy produced and edited this interview for broadcast with Catherine Welch. Grace Griffin adapted it for the web.
This article was originally published on WBUR.org.
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