Robert Reich pens blistering assessment of Federal Reserve's 'staggering' interest hikes
Former U.S. Secretary of Labor Robert Reich is expressing concern about the Federal Reserve's interest rate hike and how it could impact millions of Americans.
In a new op-ed written for The Guardian, Reich offered a brief overview of the changes incorporated last year by Federal Reserve Chairman Jerome Powell.
"Over the past year, the Fed raised interest rates at the fastest pace since the 1980s, from near zero to more than 4.5%," Reich noted. "But consumer spending isn't slowing. It fell slightly in November and December but jumped 1.8% in January, even faster than inflation.
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"As a result, Powell is now saying he may need to lift rates above 5%," he added. "A recent paper by a group of academic and Wall Street economists suggests that he will need to raise interest rates as high as 6.5% to meet his 2% target."
"Predicting how the shift could ultimately impact the country," Reich added, "This would worsen America's already staggering inequalities."
He went on to point out an important detail the country's spending and the group of Americans the interest rate increases really impact writing, "You see, the Americans who are doing most of the spending are not the ones who will be hit hardest by the rate increases. The biggest spenders are in the top fifth of the income ladder. The biggest losers will be in the bottom fifth."
According to Reich, there's only one group benefiting from the heightened interest rates.
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"Those higher rates are flowing back into the top fifth’s savings, on which they’re collecting interest. But yank up rates much more and we’ll impose big sacrifices on lower-income Americans," he wrote.
Reich closed with a recommended plan of action and a suggestion for Powell.
"Powell should suggest to Congress that it use other tools to fight inflation, such as barring corporations with more than 30% market share from raising their prices higher than the overall inflation rate – as recently proposed by New York's attorney general," he wrote.
He concluded, "Mr. Powell, if you're reading, may I be perfectly frank? You weren't elected to your current post. Nor were your colleagues. That's understandable. The Fed needs to be insulated from politics. But you at least owe it to America to do your job fairly. It would be terribly unjust to draft into the inflation fight those who are least able."
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