'A huge mistake': Robert Reich slams Fed for its decision to hike interest rates again
Renowned economist and political commentator Robert Reich is expressing concern about the Federal Reserve's latest decision to raise interest rates as inflation continues to plague American workers across the United States.
In an op-ed published by The Guardian, Reich offered his assessment of the January jobs report. Although job availability has increased in several sectors, the Federal Reserve reportedly still has fears that the "wage-price spiral" could reach uncontrollable heights; an issue they are planning to address in their upcoming March meeting.
According to Reich, federal policymakers have an analogy to back their assessment.
"They fear that a labor shortage is pushing up wages, which in turn are pushing up prices – and that this wage-price spiral could get out of control," he wrote.
Despite their arguments, Reich believes it is a grave mistake to raise interest rates and pushed back against the notion that the labor shortage is driving wage increases.
"It’s a huge mistake. Higher interest rates will harm millions of workers who will be involuntarily drafted into the inflation fight by losing jobs or long-overdue pay raises," Reich wrote. "There’s no 'labor shortage' pushing up wages. There’s a shortage of good jobs paying adequate wages to support working families. Raising interest rates will worsen this shortage."
Reich went on to debunk the crisis surrounding the "wage-price spiral" describing it as a thing of the past. "Remember when John F. Kennedy 'jawboned' steel executives and the United Steel Workers to keep a lid on wages and prices?" Reich asked, adding, "But such spirals are no longer a problem. That’s because the typical worker today has little or no bargaining power."
Pushing back against the strategy of slowing the economy, Reich explained why it won't work. "Slowing the economy won’t remedy either of the two real causes of today’s inflation – continuing worldwide bottlenecks in the supply of goods and the ease with which big corporations (with record profits) pass these costs to customers in higher prices," he wrote.
He later added, "The Fed’s plan to slow the economy is the opposite of what’s needed now or in the foreseeable future. Covid is still with us. Even in its wake, we’ll be dealing with its damaging consequences for years: everything from long-term COVID to school children months or years behind."
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