Democratic Sen. Elizabeth Warren of Massachusetts on Sunday slammed Federal Reserve Chairman Jerome Powell for suggesting interest rates should go up to combat inflation in the US, saying he could “tip this economy into recession.”
“I am very worried about this because the causes of inflation – things like the fact that Covid is still shutting down parts of the economy around the world, that we still have supply chain kinks, that we still have a war going on in Ukraine that drives up the cost of energy, and that we still have these giant corporations that are engaging in price gouging,” Warren told CNN’s Dana Bash on “State of the Union.”
“There is nothing in raising the interest rates, nothing in Jerome Powell’s tool bag, that deals directly with those, and he has admitted as much in congressional hearings when I’ve asked him about it,” the senator continued, adding: “Do you know what’s worse than high prices and a strong economy? It’s high prices and millions of people out of work.”
“I’m very worried that the Fed is going to tip this economy into recession,” said Warren, who earlier this year opposed Powell’s renomination to lead the Fed.
Fears of a recession in the US have been mounting for weeks, and Warren’s comments come just two days after Powell, the head of the nation’s central bank, hinted at a possible recession during a keynote speech at the Federal Reserve’s annual Jackson Hole Economic Symposium. Powell told investors during his remarks that the Fed was laser-focused on inflation and would continue its historic pace of rate hikes for the foreseeable future.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” he said.
Like Warren, Wall Street also reacted negatively to the tone of Powell’s speech, with the major indices dropping on the prospect of a sustained period of higher interest rates and the associated economic pain – a word Powell invoked twice in his brief speech, referencing slower growth, higher unemployment and financial strain that tighter policy will inevitably visit on American homes and businesses.
Warren has previously urged Powell to proceed with rate hikes cautiously and avoid setting off a recession that would cost millions of jobs, including at a Senate hearing in June, when she expressed concern about the impact of the Fed’s rate hikes on families and the risk of a recession and issued a warning similar to the one she gave Sunday.
“You know what’s worse than high inflation and low unemployment? It’s high inflation with a recession and millions of people out of work,” she told Powell. “I hope you consider that before you drive this economy off a cliff.”
CNN’s Martha C. White and Matt Egan contributed to this report.