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Two US senators are calling on Federal Reserve Chairman Jerome Powell to cut interest rates to avoid an economic recession.
In a new letter sent directly to Powell, Democrats Elizabeth Warren (D-MA) and Jacky Rosen (D-NV) argue that persistently high rates are slowing the economy and driving up housing and insurance costs, which the senators say are "major drivers." current inflation rate.
“Housing inflation makes up a large portion of the consumer price index (CPI), and high interest rates cause home values to increase, not decrease. High interest rates have driven up rental, mortgage and construction prices, limiting the supply of housing and keeping prices high.
[Mark Zandi, chief economist at Moody's Analytics], emphasized that if "rents for single-family homes are excluded from the Fed's preferred price target, inflation will already be below 2%."
Warren and Rosen also argue that auto insurance costs have risen due to a shortage of mechanics, more serious and frequent car accidents, damage related to climate change, and more complex vehicles that cost more to repair.
“None of these factors are mitigated by high interest rates. In fact, the Fed's rapid rate hikes in 2022 may have had the opposite of its intended effect, prompting insurers to raise premiums."
The Fed plans to release its next statement on the federal funds rate at the Federal Open Market Committee (FOMC) meeting on June 12. Analysts expect the central bank to keep rates unchanged.
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