Warren, Hickenlooper Call on Fed to Deliver Bigger Rate Cut to Protect the Economy and Provide Relief for American Families

Warren, Hickenlooper Call on Fed to Deliver Bigger Rate Cut to Protect the Economy and Provide Relief for American Families

With new inflation data showing inflation nearly at Fed's target, Senators call for .5% cut

"If the Fed moves forward with more rate cuts, housing prices and mortgage rates would thus also likely drop, allowing more families to achieve the American dream."

Text of Letter (PDF)

Washington, D.C. - Ahead of the Federal Reserve's (Fed; the Board) November Federal Open Market Committee meeting, U.S. Senator Elizabeth Warren (D-Mass.) and John Hickenlooper (D-Colo.) urged Fed to deliver a 50 basis point (.50%; each basis point is one hundredth of a percent) cut to the federal funds rate.

After months of calling on the Fed to cut the federal funds rate, the Board finally lowered it by 50 basis points in September, the first cut since 2020. The Fed explained: "[t]he Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance."

Recent economic data shows that inflation has fallen to 2.1 percent, the lowest since February of 2021. There is no need for restrictive interest rates given this inflation data.

Even as the economy remains strong, the demand for workers may be waning due to the Fed's restrictive monetary policy. New statistics from the Department of Labor indicate that unemployment claims fell while the number of Americans collecting unemployment benefits rose, suggesting unemployed people are having a more difficult time landing jobs.

The Senators noted that borrowing costs, and in turn housing costs, are still too high. Lowering interest rates is key to unlocking more supply: rate cuts will lower the cost of capital, which would help tackle inflation by spurring more housing construction and consequently lowering housing prices. However, the Fed's high interest rates have suppressed housing construction for years.

"If the Fed moves forward with more rate cuts, housing prices and mortgage rates would thus also likely drop, allowing more families to achieve the American dream," wrote the senators.

Senator Warren has been ringing the alarm bells about the serious dangers of Chair Powell's failure to lower interest rates:

• In September 2024, Senators Elizabeth Warren, John Hickenlooper (D-Colo.), and Sheldon Whitehouse (D-R.I.) called on the Fed to cut the federal funds rate, currently at a two decade-high of 5.3 percent, by 75 basis points at the September Federal Open Market Committee meeting.
• In July 2024, Senators Warren, Hickenlooper (D-Colo.), and Sheldon Whitehouse (D-R.I.) urged Fed Chair Jerome Powell, cut to interest rates at the Fed's July Federal Open Market Committee (FOMC) meeting, in light of economic data showing that inflation was decreasing and very close to the Fed's target.
• In June 2024, Senators Warren, Rosen (D-Nev.), and Hickenlooper (D-Colo.) wrote to the Federal Reserve (the Fed), urging Chair Jerome Powell to cut the federal funds interest rates from the two-decade-high of 5.5 percent.
• 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.

###