Rep. Ritchie Torres (D-N.Y.) is calling on Federal Reserve Chair Jay Powell to “immediately” cut interest rates.
In a letter sent yesterday to the U.S. central bank – shared exclusively with Punchbowl News – Torres argued that the Fed was risking a recession by waiting as late as September to lower interest rates from their highest level since 2000. Markets swooned on Monday over fears of a global economic downturn after the Fed punted on a July rate cut. Stocks largely recovered on Tuesday, but we’re not out of the woods.
“Time is running out. The longer the Fed takes to cut interest rates, the greater the risk of a recession,” Torres wrote. “We may be fast approaching the point of no return.”
Read the full letter here.
Plenty of Democrats have called for the Fed to cut rates this year. Even some Senate Republicans told us last week that the time to cut was approaching.
When the Fed decided not to cut in the last week of July – even while strongly suggesting a cut was on the table for September – lawmakers like Sen. Elizabeth Warren (D-Mass.) warned that the Fed had made a “serious mistake” by continuing to wait.
What Torres is calling for here is different. The Federal Open Market Committee, which sets interest rate policy for the Fed, isn’t scheduled to meet again until September. An immediate cut to rates would require an emergency meeting, which is typically reserved for a full-blown crisis.
The last emergency meeting convened by the Fed was in March 2020 as the Covid-19 pandemic first walloped the United States. For now, that approach appears unlikely, with FOMC officials like Chicago Fed President Austan Goolsbee telling the New York Times that there’s “nothing in the Fed’s mandate that’s about making sure the stock market is comfortable.”
We should also note that the economic impact of interest rate moves is slow. Looser credit conditions would take weeks or months to settle into the economy, even if the Fed chose to cut rates by 50 or 75 basis points than the usual 25 bps.
— Brendan Pedersen
