The Federal Reserve has raised rates for the third consecutive time by 0.75%, in an attempt to tame inflation by increasing the cost of borrowing and therefore dampening demand.
Positive Money U.S.’s lead campaigner Akiksha Chatterji said,
“Try as it might, the Fed’s toolkit is limited to tackle the root causes of current inflation, especially the supply-side issues. Rate hikes are a blunt tool that will not address price shocks to essentials like energy and food, exacerbated by the war in Ukraine, that contribute greatly to generalized inflation. Raising rates further risks plunging millions into unemployment, disproportionately hurting communities of color that are already struggling in these difficult times.
“Aggressive rate hikes may also harm countries with dollar-denominated debt in the global south, like Pakistan, which is currently facing unprecedented climate-fuelled disasters.
“We need to look for fairer measures to tackle price shocks, which will only become more frequent as the climate crisis intensifies. Instead of using imprecise and repetitive rate hikes, policymakers should employ more precise tools, like targeted price caps on essential goods and services and boosting investments in particular sectors to unblock supply chains.”
In August, Fed Chair Jerome Powell warned that “a failure to restore price stability would mean far greater pain” to households and businesses. However, Positive Money US argues that raising interest rates is the wrong tool for that outcome. Addressing the root causes of current inflation and doing so without hurting working communities requires a more tailored toolkit.
Notes:
- Federal Reserve raises rates for third time by 0.75%: Federal Reserve issues FOMC statement
- For more information or to speak with a spokesperson, please contact akiksha.chatterji@positivemoney.us or Akiksha Chatterji on 510-988-3230
- Positive Money US is a new US branch of an international research and campaign organization working towards a money and banking system which supports a fair, democratic and sustainable economy.