U.S. senators urge Federal Reserve to cut interest rates

U.S. Senators Elizabeth Warren, Jacky Rosen, and John Hickenlooper have written to the Federal Reserve, demanding a cut in the nation’s interest rate, currently at a two-decade high of 5.5%. They argue that these high rates are driving up costs for housing and insurance, hurting working Americans.

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Like the European Central Bank, central banks worldwide have started lowering their rates. Last week, the ECB cut its rates from 4% to 3.75%. The senators believe keeping interest rates high is widening the rate gap between Europe and the U.S., potentially pushing the dollar higher and tightening financial conditions.

Americans struggle with housing and auto insurance

Since March 2022, the Federal Reserve has raised interest rates eleven times, leading to the highest levels in over twenty years. Despite numerous calls from economists and legislators for rate cuts, the Fed has not yet reduced rates. This situation is raising housing and auto insurance costs, further burdening working families.

According to the senators, price gouging and corporate greed are also contributing to the persistently high costs. In their letter , the senators specifically addressed the issue of housing prices. They noted that the country is already facing a severe housing shortage. The Fed’s refusal to lower interest rates exacerbates this shortage and drives higher inflation rates.

“Lower mortgage rates would encourage more people to sell their homes, which would in turn increase housing supply, decrease prices, ease the costs of renting, and ultimately increase homeownership.”

Elizabeth Warren, Jacky Rosen, and John Hickenlooper

Regarding auto insurance rates, the senators pointed out several contributing factors. They mentioned a shortage of mechanics, more severe and frequent car accidents, climate change causing more vehicle damage from extreme weather, and more complex cars that are expensive to repair. They stressed that none of these factors are mitigated by high interest rates.

Warren has been asking for rate cuts all year

The senators argue that the Fed’s monetary policy threatens the economy and risks a recession that could push thousands of American workers out of their jobs. “You have kept interest rates too high for too long. It is time to cut rates,” they concluded.

Senator Warren has been particularly vocal about the dangers of Chair Powell’s continued interest rate hikes. In March, she and Senator Sheldon Whitehouse sent a letter to Powell, expressing concerns about the damaging impact of the extreme 2022 and 2023 interest rate hikes.

Also Read: Inflation Stumbles Dollar Rally, Fueling Speculation of Rate Cuts

They argued that these hikes have halted the deployment of clean energy technologies and undermined the Inflation Reduction Act’s climate and consumer benefits. The senators called for rate cuts to allow for continued progress on clean energy projects and the associated climate and economic benefits.

Earlier in January, Senators Warren, Hickenlooper, Rosen, and Whitehouse sent another letter to Chair Powell. They urged the Fed to reverse its troubling interest rate hikes that have driven mortgage rates to 20-year highs, putting affordable housing out of reach for many Americans.

Cryptopolitan reporting by Jai Hamid