June 10, 2024

Warren, Rosen, Hickenlooper Push Federal Reserve to Lower Interest Rates

To Chair Powell: “You have kept interest rates too high for too long: it is time to cut rates.”

Text of Letter (PDF)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.), Jacky Rosen (D-Nev.), and John Hickenlooper (D-Colo.) wrote to the Federal Reserve (the Fed), urging Chair Jerome Powell to cut the federal funds interest rates from its current, two-decade-high of 5.5 percent. This comes as major central banks around the globe have cut rates or are leaning towards lowering interest rates — including the European Central Bank, which cut its rates last week from 4% to 3.75%. The letter also raises concerns that high interest rates are increasing the costs of housing and insurance, - continuing to hurt working Americans as rates remain unchanged. 

“The Fed’s decision to keep interest rates high continues to widen the rate gap between Europe and the U.S, as the lower interest rates could push the dollar higher, tightening financial conditions,” wrote the senators. “The Fed’s current interest rate policy is also having the opposite of its intended effect: it is driving up housing and auto insurance costs, which are currently the main drivers of the overall inflation  rate.”

Since March 2022, the Fed has raised interest rates eleven times, pushing them to their highest levels in over 20 years. Despite calls for rate cuts from many economists and legislators, the Fed has yet to lower rates at home, threatening the economy and causing housing and auto insurance costs to rise. These two factors, combined with price gouging and corporate greed by big businesses, serve as the main drivers of persistently high costs that continue to harm working families across the country. 

On housing prices, the senators wrote: “The country is already facing a severe housing shortage, and the Fed’s refusal to bring down interest rates is exacerbating this shortage and driving 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.”

On auto insurance rates, the senators continued: “(T)he increase in the cost of motor vehicle insurance reflects factors including a shortage of mechanics, more severe and frequent car accidents, climate change leading to more vehicles damaged by extreme weather, and more complex cars that are more expensive to repair.  None of these factors are mitigated by high interest rates.”

“The Fed’s monetary policy is not helping to reduce inflation. Indeed, it is driving up housing and auto insurance costs—two of the key drivers of inflation—threatening the health of the economy and risking 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,” concluded the senators. 

Senator Warren has been ringing the alarm bells about the serious dangers of Chair Powell’s continued interest rate hikes: 

  • In March 2024, Senators Warren and Sheldon Whitehouse (D-R.I.) sent a letter to Chair Powell, expressing concerns about the damaging impact of the Fed’s extreme 2022 and 2023 interest rate hikes, which have halted deployment of clean energy technologies and have undermined the Inflation Reduction Act’s climate and consumer benefits. The senators called on the Fed to cut interest rates to allow for continued progress on clean energy projects and the climate and economic benefits they provide. 
  • In January 2024, Senators Warren, John Hickenlooper (D-Colo.), Jacky Rosen (D-Nev.), and Whitehouse sent a letter to Chair Powell, calling on the Fed to reverse its troubling interest rate hikes that have driven mortgage rates to 20-year highs and have put affordable housing out of reach for too many Americans. 
  • In July 2023, Senator Warren sent a letter to Chair Powell, raising concerns about the disproportionate impact of the Fed’s monetary policy amid rising unemployment for Black workers. 
  • In May 2023, Senator Warren led lawmakers in a letter to Chair Powell, calling on the Fed to pause interest rate hikes and respect its dual mandate of maximum employment and price stability, particularly in the wake of recent turmoil in the banking system following the collapses of Silicon Valley Bank, Signature Bank, and First Republic Bank. The lawmakers expressed serious concerns that the Fed’s monetary policy strategy of more rate hikes could trigger a recession, throw millions out of work, and crush small businesses. 
  • In March 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren questioned Chair Powell on the Fed’s monetary policy plan and its projection that the unemployment rate will rise sharply to 4.6% by the end of the year if the Fed continues to raise interest rates. Senator Warren highlighted that the Fed’s projections suggest that nearly 2 million people will lose their jobs, and that history shows that the Fed has a poor track record of containing moderate increases in unemployment.
  • In November 2022, Senator Warren and Representative Madeleine Dean (D-Pa.) led their colleagues in sending a letter to Chair Powell, expressing concern and seeking answers about the Fed’s most recent economic projections, its intentions to continue to raise interest rates at a rapid pace, and its disturbing warning to American families that they should expect “pain” in the coming months. 
  • In July 2022, Senator Warren published an op-ed in the Wall Street Journal warning that the Fed’s decision to aggressively raise interest rates risks triggering a devastating recession.
  • In June 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called out Chair Powell for the Fed’s announced interest rate increases that wouldn’t address the key drivers of inflation. Chair Powell confirmed that the Fed’s interest rate increases will not bring down gas and food prices, two of the biggest drivers of inflation.