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.
