Rate Cuts Now: Democrats Pressure Jerome Powell

Three prominent figures from the Democratic Party in the United States, including Elizabeth Warren of Massachusetts, Jacky Rosen of Nevada and John Hickenlooper of Colorado, made a direct appeal to Federal Reserve Chairman Jerome Powell. In a detailed letter, the senators called for an immediate review of the federal funds rate, currently set at 5.5% — the highest level seen in the past two decades.

“We write today to urge the Federal Reserve to reduce the federal funds rate from a two-decade high of 5.5 percent,” the senators stated in the statement available on HuffPost. They argue that the persistence of this high interest rate has been slowing the economy without effectively addressing the main factors that drive inflation.

This initiative comes at a critical time for financial markets, which have recently adjusted their expectations for a September interest rate cut, previously forecast for July. The change in expectations had a direct impact on the performance of Bitcoin, whose price was temporarily stagnant.

Furthermore, the senators highlighted that the current scenario of high rates has contributed to the increase in housing, construction and automobile insurance costs. They have expressed concerns that maintaining high rates for a prolonged period could push the economy into a recession, resulting in job losses for thousands of American workers. “Higher interest rates increase rental costs,” JPMorgan analysts noted.

In the missive, it was suggested that the Federal Reserve follow the lead of the European Central Bank (ECB) and reconsider its strict 2% inflation target. Recently, both the ECB and the Bank of Canada have adjusted their policies, opting to reduce their interest rates, unlike the Federal Reserve’s stricter stance.

Senators also expressed concern that the discrepancy between monetary policies could further strengthen the dollar and generate tighter financial conditions, affecting the flow of credit and slowing the economy in several sectors.

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