Fed’s interest rake hikes could cause recession, Sen. Elizabeth Warren warns
- Oops!Something went wrong.Please try again later.
Sen. Elizabeth Warren voiced concern Sunday that the Federal Reserve’s efforts to fight inflation will cause a recession.
“Do you know what’s worse than high prices and a strong economy?” the Massachusetts Democrat said 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 this economy into recession.”
The Federal Reserve is planning to sharply raise interest rates in the coming months, in the hopes of reducing the highest inflation the country has seen in decades, Fed Chairman Jerome Powell said Friday.
“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,” he said at the Fed’s yearly economic symposium in Jackson Hole, Wyo. “These are the unfortunate costs of reducing inflation.”
Warren, who’s known for her progressive economic proposals, strongly objected to that approach.
“What he calls ‘some pain’ means putting people out of work [and] shutting down small businesses, because the cost of money goes up because the interest rates go up,” she said.
The senator rattled off problems she blamed for inflation — from the ongoing war in Ukraine to “price gouging” by big businesses — saying the Fed doesn’t have the ability to handle such challenges.
“There is nothing in raising the interest rates, nothing in Jerome Powell’s tool bag, that deals directly with those,” she said.
The U.S. economy shrank in the first two fiscal quarters of the year, meeting a traditional definition of recession. But strong jobs numbers have caused many economists to hold off on officially deeming the state of the economy a recession.
Warren, a former presidential hopeful, applauded President Biden’s recently announced student loan forgiveness plan.
“Right now, hardworking families, middle-class families, working-class families, have gotten some real relief,” she said.
Under Biden’s plan, more than 40 million Americans are expected to get their student debt reduced or eliminated.
With News Wire Services
