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Sen. Hickenlooper cautions Fed against hiking interest rates again without understanding impacts

By: - October 27, 2022 12:56 pm

Federal Reserve Board Chairman Jerome Powell is greeted by U.S. Sen. Jon Tester (D-MT) as he arrives to testify before the Senate Banking, Housing and Urban Affairs Committee July 11, 2019 in Washington, D.C. Powell delivered testimony on the “Semiannual Monetary Policy Report to the Congress.” (Win McNamee/Getty Images)

U.S. Sen. John Hickenlooper of Colorado wrote a letter asking the Federal Reserve Board to pause an increase in interest rates Thursday out of concern for how recent increases will have negative consequences.  

The Fed has increased interest rates five times since March in an attempt to control inflation, but Hickenlooper cautioned against raising rates again until the Fed can “fully understand the impact of previous increases,” a news release from Hickenlooper’s office said. The release said there is a time lag between when the Fed makes a decision and the consequences it has on American workers, and Hickenlooper said this should encourage caution as opposed to haste. 

“High inflation necessitates a response,” Hickenlooper wrote. “But the concern is that the Fed is doing too much, too quickly.”

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In the letter addressed to Fed Chair Jerome Powell, Hickenlooper noted the severe impact Russia’s invasion of Ukraine, as well as labor shortages and supply chain issues, all have on inflation, and the Fed “does not possess tools to address those causes.” 

“The Fed’s bluntest tool is interest rate increases, and it has wielded that hammer repeatedly,” Hickenlooper wrote. “However, after five straight rate increases by the Fed, I worry any additional action will undermine economic growth and harm American families. To date, the Fed’s actions have failed to stem inflationary pressure on Americans.”

Nonpartisan staff of the Colorado Legislature recently warned against increased risk of recession and impact on the state’s budget due to global events like the war in Ukraine and the Fed’s policy decisions. 

Hickenlooper’s letter also noted that the Fed’s interest rate increase of 3 percentage points since March is the fastest increase of that size since 1982, which he said is understandable given the severity of inflation, but the effects need to be monitored before another hike. He said the Fed’s decisions have only further increased the cost of living across the country, especially for communities of color and middle-class families. 

“Mortgage rates have skyrocketed, borrowing costs for Main Street businesses have risen, credit card payments have gone up as interest payments have climbed, car loans are becoming more expensive,” Hickenlooper wrote. “The risk is that higher interest rates will lead us into a potential recession, hurting the middle-class workers who have not seen wage gains in decades. A Federal Reserve overreach could crush wage increases and hurt workers who are blameless for inflation.”

Congress has also taken action this year to address inflation, passing laws such as the Inflation Reduction Act to help lower health care and energy costs.

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Lindsey Toomer
Lindsey Toomer

Lindsey Toomer covers politics, social justice and other stories for Newsline. She formerly reported on city government at the Denver Gazette and on Colorado mountain town government, education and environment at the Summit Daily News. Toomer graduated from the Pennsylvania State University, where she also served as managing editor of The Daily Collegian, with degrees in journalism and global studies.

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