Federal Reserve Chairman Jerome Powell faces political pressure on interest rate hikes

U.S. Senator Sherrod Brown called on Fed Chairman Jerome Powell to keep in mind the “double mandatet” of the Federal Reserve when it makes the decision to raise interest rates at the next Federal Open Market Committee (FOMC) meeting. “It’s your job to fight inflation, but at the same time, you must not lose sight of your responsibility to make sure we have full employment“, the senator told the Fed president.

U.S. senator reminds Powell of Fed’s dual mandate

Federal Reserve Chairman Jerome Powell is facing political pressure over interest rate hike decisions. U.S. Senator Sherrod Brown, chairman of the Senate Banking, Housing and Urban Affairs Committee, sent a letter to Jerome Powell on Tuesday asking him to consider the Fed’s dual mandate before making any interest rate hike decisions at the next Federal Open Market Committee (FOMC) meeting.

Senator Sherrod Brown wrote:

As you know, the Federal Reserve is charged with the dual mandate of promoting maximum employment, stable prices, and moderate long-term interest rates in the American economy.

It’s your job to fight inflation, but at the same time, you must not lose sight of your responsibility to make sure we have full employment“, the legislator stressed.

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For American workers who are already feeling the crush of inflation, job losses will only make things worse. We can’t risk the livelihoods of millions of Americans who can’t afford it“, Sherrod Brown continued, stating:

I ask that you not forget your responsibility to promote maximum employment and that the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate.

A Fed spokesperson reportedly confirmed that Powell received the letter sent by Brown, noting that the normal policy is to respond directly to such communications.

Commenting on Brown’s letter to Powell, Mark Zandi, chief economist at Moody’s Analytics, was quoted by CNBC as saying, “Chairman Powell has made it pretty clear that the conditions necessary for the Fed to reach full employment are low and stable inflation. Without low and stable inflation, there is no way to reach full employment.“He added:

He’s going to stick to his guns on this. I don’t think it has any material impact on decision making at the Fed.

Quincy Krosby, an economist at LPL Financial, believes that, “The democratization of the Fed is the question for the market, how much power do the other members have relative to the chairman. It’s hard to know“. Regarding Brown’s letter, the analyst said, “I don’t think it will affect him“, noting:

He knows the pressure. He knows that politicians are increasingly nervous about losing their seats. There is little he can do to help either party.

Bleakley Advisory Group’s chief investment officer, Peter Boockvar, commented, “I don’t necessarily think Powell will cave to political pressure, but I wonder if some of his colleagues are starting to, some of the doves turned hawks…Jobs are fine now, but as the months go by and growth continues to slow and layoffs start to increase at a more noticeable rate, I have to believe that the pressure level will increase.

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