Senate Budget Committee Chairman Sheldon Whitehouse and House Budget Committee Ranking Member Brendan F. Boyle have written a letter to Federal Reserve Board Chair Jerome Powell, expressing concern over the harmful economic effects of prolonged elevated interest rates and calling on the Fed to begin lowering rates. The lawmakers believe that excessively tight monetary policy may jeopardize the strong job market that the U.S. has enjoyed over the last several years and that lowering rates now will ensure that unnecessary and harmful economic damage is not caused. They also warned that elevated interest rates are needlessly raising housing costs for families and that keeping rates higher for longer will do nothing to solve the housing crisis. The lawmakers concluded by stating that the Federal Reserve must begin to cut rates as soon as the next Federal Open Market Committee meeting. U.S. Senator Jacky Rosen also joined her Senate colleagues in sending a letter calling on Federal Reserve Chair Jerome Powell to cut federal interest rates as a way to lower the costs of rent, mortgages, and housing construction. The Federal Reserve's federal funds rate is the highest it has been in two decades. Major central banks have cut rates or are leaning towards lowering interest rates. The European Central Bank (ECB) cut its interest rates on Thursday from 4% to 3.75%. On Wednesday, the Bank of Canada, cut rates becoming the first of Group of 7 central bank to do so. Sweden, Switzerland, Hungary, and the Czech Republic have already cut rates. The Fed's decision to keep interest rates highs continues to widen the rate gap between Europe and the U.S, as the lower interest rates could push the dollar higher, tightening financial conditions. U.S. Senators Elizabeth Warren, Jacky Rosen, and John Hickenlooper are urging the Federal Reserve to reduce the nation's interest rate, currently at a two-decade high of 5.5%. They argue that the elevated rates have adverse repercussions on housing and insurance costs, particularly for working-class Americans. The senators highlight the growing disparity between U.S. and European interest rates and express concern that the Federal Reserve's reluctance to lower rates could strengthen the dollar and tighten financial conditions. They criticize the Fed for implementing eleven consecutive interest rate hikes since March 2022, leading to increased housing and auto insurance expenses. The senators also address price gouging and corporate profiteering, emphasizing the severity of the housing shortage and the surge in auto insurance costs. Senator Elizabeth Warren has been a vocal advocate for rate cuts, citing concerns about their impact on clean energy technologies and affordable housing initiatives. The senators warn that the Fed's current monetary policy stance poses significant risks to the economy and urge rate cuts to alleviate financial strain and stimulate economic growth. Members of both branches of the US legislature have written to the Federal Reserve urging the central bank to cut interest rates at its June policy meeting. Sheldon Whitehouse, chairman of the Senate’s budget committee, and Brendan Boyle, ranking member of the House of Representatives, addressed their letter to Fed chair Jerome Powell on June 10. Democratic senators Elizabeth Warren, Jacky Rosen, and John Hickenlooper also sent Powell a letter with the same overall message on June 10. The politicians argue that the Consumer Price Index (CPI) is likely to be 'grossly overstating' inflation. [ba5fc838]
Federal Reserve Chair Jerome Powell is set to testify before the Senate Banking Committee on July 9th. This will be his semiannual testimony on monetary policy. Powell's testimony is expected to cover a wide range of topics, including interest-rate policy and the state of the banking system. The following day, he is likely to deliver the same testimony at the House Financial Services Committee. Despite calls for rate cuts, the Fed has indicated it may only reduce borrowing costs once this year, depending on inflation and the labor market. Recent data shows softer than expected inflation, leading some economists to argue for a rate cut. Powell may face criticism during his testimony for the Federal Reserve's ethics policies and handling of insider trading issues. [1d901755]