Democratic senators Elizabeth Warren, Jacky Rosen, and John Hickenlooper have penned a letter to Federal Reserve Chairman Jerome Powell, urging for a reduction in the current high benchmark interest rate of 5.5%. They argue that the elevated interest rates are fueling inflation instead of curbing it, impacting various sectors such as housing, construction, and auto insurance costs.
The senators warn that maintaining these high rates could lead to a recession and job losses for American workers. They point to recent moves by the European Central Bank and the Bank of Canada to cut interest rates as a model for the Fed to follow, suggesting a departure from the rigid 2% inflation target.
The letter also raises concerns about the potential consequences of diverging policies between central banks, such as a stronger dollar and tighter financial conditions leading to an economic slowdown. The senators emphasize the need for prompt action to address these issues and support a more accommodative monetary policy.
Financial markets had previously anticipated an interest rate cut in July but have now shifted expectations to September, impacting the rally in Bitcoin. The senators stress the importance of addressing inflation concerns and ensuring the stability of the economy for the benefit of all Americans.