May 1, 2023

The Honorable Jerome Powell
Chair
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC 20551
Dear Chair Powell:
We write regarding our concern about the Federal Reserve’s (Fed’s) monetary policy strategy
and its potential to throw millions of Americans out of work. While the labor market hasremained resilient to the Fed’s aggressive interest rate hikes and inflation is down from its peaklast year,1 recent turmoil in the banking system following the failures of Silicon Valley Bank andSignature Bank2 and the lagging impacts of the Fed’s earlier rate hikes3 leave our economy evenmore vulnerable to an overreaction by the Fed. In advance of the Federal Open Market
Committee’s (FOMC’s) May 2-3 meeting,4 we strongly urge you to respect the Fed’s dual
mandate, pause your rate hikes, and avoid engineering a recession that destroys jobs and crushes
small businesses.
On March 22, 2023, the FOMC announced it would raise its target range for the federal funds
rate for the ninth-consecutive time in a year.5 While the Fed has slowed the pace of its rate hikes
in recent meetings, the March move extended the most extreme rate-hiking cycle in 40 years andpushed the Fed funds rate to a 15-year high.6 The FOMC’s updated Summary of Economic
Projections indicated that the Fed is expecting to continue raising the funds rate this year up to

1

CNN, “US inflation falls to lowest level since May 2021,” Alicia Wallace, April 12, 2023,
https://www.cnn.com/2023/04/12/economy/cpi-inflation-march/index.html.
2
New York Times, “Fed Officials Fretted Bank Turmoil Could Have Serious Economic Consequences,” Jeanna
Smialek, April 12, 2023, https://www.nytimes.com/2023/04/12/business/economy/fed-minutes-rate-increases.html.
3
New York Times, “Unemployment Is Low. Inflation Is Falling. But What Comes Next?,” Ben Casselman, April
14, 2023, https://www.nytimes.com/2023/04/14/business/economy/economy-jobs-inflation-recession.html.
4
Board of Governors of the Federal Reserve System, Federal Open Market Committee Meeting calendars andinformation, https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm.
5Wall Street Journal, “Fed Raises Rates but Nods to Greater Uncertainty After Banking Stress,” Nick Timiraos,
March 22, 2023, https://www.wsj.com/articles/fed-raises-rates-but-nods-to-greater-uncertainty-after-banking-stress6ae9316f.
6
Wall Street Journal, “Fed Slows Its Tightening With Quarter-Point Interest Rate Rise,” Nick Timiraos, February 1,
2023, https://www.wsj.com/articles/fed-approves-quarter-point-rate-hike-signals-more-increases-likely11675278190; Wall Street Journal, “Fed Raises Rates but Nods to Greater Uncertainty After Banking Stress,” Nick
Timiraos, March 22, 2023, https://www.wsj.com/articles/fed-raises-rates-but-nods-to-greater-uncertainty-afterbanking-stress-6ae9316f.

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5.1%7 – unchanged from the Fed’s December 2022 projection but higher than the September
2022 projection of 4.6%.8
The March interest rate hike came even as the turmoil in the banking system led Fed staff toproject a “mild recession starting later this year.”9 You acknowledged in your March 22, 2023
press conference that the fallout from the Silicon Valley Bank and Signature Bank failures is“likely to result in some tightening credit conditions for households and businesses and thereby
weigh on demand, on the labor market, and on inflation. Such a tightening in financial conditions
would work in the same direction as rate tightening. In principle, as a matter of fact, you canthink of it as being the equivalent of a rate hike or perhaps more than that.”10 Indeed, there are
already “signs that small and midsize lenders have begun to tighten their credit standards in
response to the crisis, which, in turn, could push the businesses that are their clients to cut backon hiring and investment.”11 State governors have noted that the Fed’s rate hikes “are alreadyproving to be a barrier as [states] look to invest in major infrastructure projects” and have been“counterproductive” to ensuring families’ access to affordable housing.12
Recent economic data also suggest that additional rate hikes are unnecessary. Since peaking in
June 2022, the headline year-over-year Consumer Price Index has fallen for nine consecutive
months to its lowest level in nearly two years.13 The Personal Consumption Expenditures priceindex has similarly slowed from its peak level in early 2022.14 While inflation “is showing signsof dissipating,”15 the labor market has remained resilient, with the economy adding jobs at asolid though slowing pace.16 The unemployment rate in March fell to 3.5%, with the
unemployment rate for Black Americans falling to its lowest level on record.17 Overall,

7

Board of Governors of the Federal Reserve System, “Summary of Economic Projections,” March 22, 2023, p. 2,
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf.
8
Board of Governors of the Federal Reserve System, “Summary of Economic Projections,” December 14, 2022, p.
2, https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20221214.pdf; Board of Governors of theFederal Reserve System, “Summary of Economic Projections,” September 21, 2022, p. 2,
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf.
9
New York Times, “Fed Officials Fretted Bank Turmoil Could Have Serious Economic Consequences,” Jeanna
Smialek, April 12, 2023, https://www.nytimes.com/2023/04/12/business/economy/fed-minutes-rate-increases.html.
10
Board of Governors of the Federal Reserve System, “Chair Powell’s Press Conference,” press conference, March
22, 2023, https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230322.pdf.
11
New York Times, “Unemployment Is Low. Inflation Is Falling. But What Comes Next?,” Ben Casselman, April
14, 2023, https://www.nytimes.com/2023/04/14/business/economy/economy-jobs-inflation-recession.html.
12Letter from Governor Daniel J. McKee to Federal Reserve Chair Jerome Powell, March 31, 2023,
https://www.wpri.com/wp-content/uploads/sites/23/2023/03/Fed-Letter-Jerome-Powell-McKee-3_27_23-v8.pdf.
13
CNN, “US inflation falls to lowest level since May 2021,” Alicia Wallace, April 12, 2023,
https://www.cnn.com/2023/04/12/economy/cpi-inflation-march/index.html.
14
Federal Reserve Bank of St. Louis, “Personal Consumption Expenditures: Chain-type Price Index,” Federal
Reserve Economic Data, https://fred.stlouisfed.org/series/PCEPI; Federal Reserve Bank of St. Louis, “Personal
Consumption Expenditures Excluding Food and Energy (Chain-Type Price Index),” Federal Reserve Economic
Data, https://fred.stlouisfed.org/series/PCEPILFE.
15
New York Times, “Unemployment Is Low. Inflation Is Falling. But What Comes Next?,” Ben Casselman, April
14, 2023, https://www.nytimes.com/2023/04/14/business/economy/economy-jobs-inflation-recession.html.
16
CNBC, “Job growth totals 236,000 in March, near expectations as hiring pace slows,” Jeff Cox, April 7, 2023,
https://www.cnbc.com/2023/04/07/jobs-report-march-2023.html.
17
Id.

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compared to the labor market prior to the pandemic, “More people are working. They are paid
more. The gaps between them — by race, gender, education or income — are smaller.”18
It is even more difficult to justify such aggressive rate hikes at the moment given that inflation
over the past six months has already declined significantly, averaging just 3.6 percent at anannualized rate, compared to 6.4 percent for the previous six months.19 Wage growth has also
slowed to 3.2 percent over the last three months, which is widely recognized to be consistent
with the Fed’s 2-percent inflation target, as we witnessed pre-pandemic.20
Continued interest rate hikes needlessly threatens this progress. As one report noted, the “gradualrebound in the number of people working or looking for work — and the fact that pay gains havebeen easing even as the jobless rate has plummeted — could make some Fed officials question
whether they need to slow down the job market as drastically as they had expected.”21 While the
Fed should remain flexible to incoming data as it assesses the economy’s progress towardachieving lower inflation, the evidence to date suggests that progress can continue to be madewithout slamming the brakes on the economy and costing millions of Americans their jobs.
Your recent comments, however, suggest that you remain committed to the idea that millions ofworkers must lose their jobs in order to bring inflation to heel. In your view, the economy is “notgoing to have a sustainable return to 2 percent inflation…without a better balance in the labormarket. And I don’t know what that will require in terms of increased unemployment” though“most forecasters would say that unemployment will probably rise a bit from here.”22
History casts doubt on the Fed’s ability to engineer an unemployment rate that just “rise[s] abit.”23 The FOMC’s March forecast shows that the Fed seeks to drive the unemployment rate up
by a percentage point this year, from 3.5% in March24 to 4.5%.25 But analysts note that sinceWorld War II, the unemployment rate has never increased by one percentage point within a year
outside of a recession: the unemployment rate has increased by one percentage point 12 times
since 1945, and in all 12 times that increase has been in the context of a recession.26 And every
time the unemployment rate increased by a full percentage point, it continued to increase far
18

New York Times, “Unemployment Is Low. Inflation Is Falling. But What Comes Next?,” Ben Casselman, April
14, 2023, https://www.nytimes.com/2023/04/14/business/economy/economy-jobs-inflation-recession.html.
19
Bureau of Labor Statistics, “CPI for All Urban Consumers (CPI-U),” Sept 2022-March 2023 average,
https://beta.bls.gov/dataViewer/view/timeseries/CUSR0000SA0.
20
Center for Economic and Policy Research, “Strong Job Growth Again in March, but Hours Drop, and Wage
Growth Slows Further,” Dean Baker, April 7, 2023. https://cepr.net/strong-job-growth-again-in-march-but-hoursdrop-and-wage-growth-slows-further/.
21
New York Times, “January Jobs Report Contained Hopeful and Worrying News for the Fed,” Jeanna Smialek,
February 3, 2023, https://www.nytimes.com/2023/02/03/business/economy/federal-reserve-jobs-jeromepowell.html.
22
Board of Governors of the Federal Reserve System, “Chair Powell’s Press Conference,” press conference,
February 1, 2023, https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230201.pdf.
23
Id.
24
CNBC, “Job growth totals 236,000 in March, near expectations as hiring pace lows,” Jeff Cox, April 7, 2023,
https://www.cnbc.com/2023/04/07/jobs-report-march-2023.html.
25
Board of Governors of the Federal Reserve System, “Summary of Economic Projections,” March 22, 2023, p. 2,
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf.
26
Employ America, “The Fed Is Trying To Engineer A Recession,” Alex Williams, January 9, 2023,
https://www.employamerica.org/blog/the-fed-is-trying/.

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beyond that level.27 The Fed’s projections that unemployment will essentially stay level in 2024
after pushing the economy into a recession in 2023, warns an economist concerned withmaintaining full employment, “amounts to a convenient delusion.”28
The Fed’s focus on driving unemployment higher is particularly concerning given youracknowledgement that inflation has been driven by factors other than labor market dynamics.
You have noted in recent speeches that “a big part of this inflation is actually related to thepandemic itself, the shut down and then the reopening”29 and that “it is very difficult to forecast
inflation now” because “the situation is so different from the normal one. And…a lot of it is justthat the difficulty is just the supply side constraints that we’ve had.”30
This echoes previous comments you have made in which you recognized that the Fed’s tools“don’t really work on supply shocks” 31 and that “many factors that we don’t control are going toplay a very significant role in deciding whether” the economy can maintain a strong labor market
while bringing inflation down to the Fed’s target rate.32 Indeed, recent Fed research affirms that
pandemic-induced reallocation shocks33 and corporate price markups34 have overwhelmingly
driven the rise in inflation over the last year. European central bankers have warned of the “risksof a so-called profit-price spiral” in which large corporations “that push up their prices above andbeyond what is necessary to absorb higher costs could be fueling inflation.”35 Nevertheless, youhave maintained that the “great labor market” is “too great in a way, because it’s going to be
adding to inflation.”36
We strongly agree with FOMC participants who emphasized in your March meeting “the need toretain flexibility and optionality in determining the appropriate stance of monetary policy given
the highly uncertain economic outlook.”37 But we remain deeply concerned that the Fed risks
27

Id.
Id.
29
Federal Reserve Board of Governors, Fed Chair Powell interview at The Economic Club of Washington, February
7, 2023, https://www.youtube.com/watch?v=kkC4LuuxOg4&ab_channel=CNBCTelevision.
30
Brookings Institution, “Federal Reserve Chair Jerome Powell: The Economic Outlook, Inflation, and the Labor
Market,” November 30, 2022, https://www.brookings.edu/wpcontent/uploads/2022/11/es_20221130_powell_transcript.pdf.
31
Board of Governors of the Federal Reserve System, “Chair Powell’s Press Conference,” press conference, May 4,2022, https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220504.pdf.
32
Board of Governors of the Federal Reserve System, “Chair Powell’s Press Conference,” press conference, June15, 2022, https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220615.pdf.
33
Board of Governors of the Federal Reserve System, “The Inflationary Effects of Sectoral Reallocation,” Franceso
Ferrante, Sebastian Graves, and Matteo Iacoviello, February 2023, p. 1,
https://www.federalreserve.gov/econres/ifdp/files/ifdp1369.pdf.
34
Federal Reserve Bank of Kansas City, “How Much Have Record Corporate Profits Contributed to Recent
Inflation?,” Andrew Glover, José Mustre-del-Río, and Alice von Ende-Becker, January 2023,
https://www.kansascityfed.org/research/economic-review/how-much-have-record-corporate-profits-contributed-torecent-inflation/.
35
New York Times, “Are Big Profits Keeping Prices High? Some Central Bankers Are Concerned,” Eshe Nelson,
March 31, 2023, https://www.nytimes.com/2023/03/31/business/company-profit-inflation-europe.html.
36
Brookings Institution, “Federal Reserve Chair Jerome Powell: The Economic Outlook, Inflation, and the Labor
Market,” November 30, 2022, https://www.brookings.edu/wpcontent/uploads/2022/11/es_20221130_powell_transcript.pdf.
37
New York Times, “Fed Officials Fretted Bank Turmoil Could Have Serious Economic Consequences,” Jeanna
Smialek, April 12, 2023, https://www.nytimes.com/2023/04/12/business/economy/fed-minutes-rate-increases.html.
28

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throwing millions of Americans out of work in its drive to raise interest rates even higher – even
as Fed staff have already projected a recession this year amid financial market headwinds andeven as you have acknowledged that inflation can slow without destroying the labor market, thatthe most significant drivers of inflation are not demand-based, and that the economy has not yet
experienced the full impact of its earlier rate increases.
While we do not question the Fed’s policy independence, we believe that continuing to raiseinterest rates would be an abandonment of the Fed’s dual mandate to achieve both maximum
employment and price stability38 and show little regard for the small businesses and working
families that will get caught in the wreckage. Small businesses “have historically been the first
hit during economic downturns and generally suffer more-significant losses. Data show the hits
have already started.”39 Moreover, “If there is a recession, the pain will probably be felt mostacutely by those on the margins.”40 As economist William Spriggs notes, “There is no period inwhich the Fed pursued a deflationary policy in which low-income people won. The medianincome of Black families falls, and it takes years to come back. Child poverty spikes.”41
We urge you to carefully consider these consequences and ensure that the Fed does not lose sightof its mandate to achieve maximum employment. The Fed should pause its rate hikes at theupcoming FOMC’s policy meeting.
Additionally, to obtain more information about the implications of the Fed’s latest economic
projections, we request that you respond to the following by May 15, 2023:
1. The Fed’s March 2023 Summary of Economic Projections forecasts that the
unemployment rate will rise to 4.5% by the end of 202342, up from 3.5% in March
2023.43 According to the Fed’s estimates, how many lost jobs does that forecast imply?
2. The Fed’s March 2023 Summary of Economic Projections forecasts that unemployment
will rise to 4.6% by the end of 2024.44 According to the Fed’s estimates, how many lostjobs does that forecast imply?

38

Board of Governors of the Federal Reserve System, Monetary Policy Principles and Practice,https://www.federalreserve.gov/monetarypolicy/monetary-policy-what-are-its-goals-how-does-it-work.htm.
39
Wall Street Journal, “Small Businesses Keep Hiring as Fed Raises Rates to Cool Economy,” Dion Rabouin,
January 25, 2023, https://www.wsj.com/articles/surge-in-hiring-by-small-business-complicates-feds-effort-to-cooleconomy-11674627479.
40
New York Times Magazine, “The Fed May Finally Be Winning the War on Inflation. But at What Cost?,”Michael Steinberger, January 10, 2023, https://www.nytimes.com/2023/01/10/magazine/inflation-federalreserve.html.
41
Id.
42
Board of Governors of the Federal Reserve System, “Summary of Economic Projections,” March 22, 2023, p. 2,
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf.
43
CNBC, “Job growth totals 236,000 in March, near expectations as hiring pace slows,” Jeff Cox, April 7, 2023,
https://www.cnbc.com/2023/04/07/jobs-report-march-2023.html.
44
Board of Governors of the Federal Reserve System, “Summary of Economic Projections,” March 22, 2023, p. 2,
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf.

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3. The Fed’s March 2023 Summary of Economic Projections suggests that at least one
member of the FOMC projects that unemployment will rise to 5.2% by the end of 2024.45
According to the Fed’s estimates, how many lost jobs in millions, would that forecast
imply?
4. Under each unemployment forecast described above, please describe the expecteddistributional impact of lost jobs by:a. Wage quartile;b. Race;c. Sex;d. Educational attainment; ande. Sector.
5. Under each unemployment forecast described above, please describe the expected trends
in wage growth for production and nonsupervisory employees by:a. Wage quartile;b. Race;c. Sex;d. Educational attainment; ande. Sector.
6. The past three months for which we have data demonstrate a slowing of wage growth,
now measured at an annualized 3.2% rate. Does the Fed believe this wage growth isconsistent with accelerating inflation?
Thank you for your attention to this matter.
Sincerely,__________________
Elizabeth Warren
United States Senator__________________
Brendan F. Boyle
Member of Congress__________________
Pramila Jayapal
Member of Congress__________________
Sheldon Whitehouse
United States Senator__________________
Bernie Sanders
United States Senator__________________
Jerrold Nadler
Member of Congress__________________
Jamaal Bowman, Ed.D.
Member of Congress__________________Jan Schakowsky
Member of Congress__________________
Katie Porter
Member of Congress

45

Id.

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_ _________________
Jesus G. “Chuy” García
Member of Congress7