Federal Reserve Chairman Jerome Powell conceded that the Federal Reserve’s aggressive interest rate hikes won’t solve two of the biggest problems facing families: high prices for gas and groceries.
During a Senate Banking Committee hearing Wednesday, Democratic Senator Elizabeth Warren urged Powell to proceed with rate hikes cautiously and avoid setting off a recession that costs millions of jobs. Warren asked Powell if Fed rate increases will lower gas prices, which have hit record highs this month.
“I would not think so”, Powell said. Warren asked if grocery prices will go down because of the Fed’s war on inflation.
“I wouldn’t say so, no”, Powell said. Warren expressed concern about the impact of the Fed’s rate hikes on families and the risk of a recession.
“Rate hikes won’t make Vladimir Putin turn his tanks around and leave Ukraine”, Warren said, adding that they won’t break up corporate monopolies or stop Covid-19. Warren said that rate hikes will, however, raise borrowing costs on families and could cause job losses.
“Inflation is like an illness and the medicine needs to be tailored to the specific problem, otherwise you could make things a lot worse”, Warren said. “Right now, the Fed has no control over the main drivers of rising prices but the Fed can slow demand by getting a lot of people fired and making families poorer.”
The Massachusetts Democrat urged Powell to proceed cautiously with further rate hikes.
