Democratic Senators Call on Federal Reserve Chairman Powell to Lower Interest Rates Due to Inflation Concerns
Three Democratic senators, Elizabeth Warren, Jacky Rosen, and John Hickenlooper, penned a letter to Federal Reserve Chairman Jerome Powell urging a reduction in the federal funds rate, currently at a two-decade high of 5.5%. They argue that the high interest rates are not effectively addressing inflation and are instead contributing to rising costs in housing, construction, and auto insurance.
The senators warn that maintaining these elevated interest rates could potentially lead to a recession and job losses for American workers. They point to recent cuts in interest rates by the European Central Bank and the Bank of Canada as examples of diverging policies that could result in a stronger dollar and tighter financial conditions, ultimately slowing down the economy.
Financial markets had initially expected an interest rate cut in July, but the unexpected resilience of the labor market has shifted this anticipation to September. This change in expectations has also impacted the performance of Bitcoin, causing a halt in its recent rally.
In their letter, the senators suggest that the Federal Reserve should reconsider its 2% inflation target and adopt a more flexible approach similar to that of the ECB. They emphasize the importance of addressing the current inflation concerns while also preventing further economic slowdown.
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