Sen. Elizabeth Warren (D-Mass.) told Federal Reserve chair Jerome Powell that he should be careful not to “tip the economy into a recession” with interest rate hikes.
Warren, at a Senate Banking Committee hearing Wednesday, discussed how the rate hikes to help deal with rising U.S. costs could carry the economy off a “cliff,” CNN reported.
The Federal Reserve last week increased its key interest rate by three-quarters of a point, its largest hike since 1994.
The move, meant to counteract inflation by making it more costly to borrow money, raised concerns of a potential slowdown in economic activity.
Treasury Secretary Janet Yellen also said she thinks economic activity will slow. However, she said she doesn’t think a recession is “inevitable.”
Warren told Powell, “Inflation is like an illness, and the medicine needs to be tailored to the specific problem, otherwise you could make things a lot worse.”
“Right now, the Fed has no control over the main drivers of rising prices, but the Fed can slow demand by getting a lot of people fired and making families poorer.”
Warren asked what was worse than high inflation and low unemployment and then gave Powell an answer: High inflation with a recession and millions without jobs.
“I hope you consider that before you drive this economy off a cliff,” she said.
You can watch a clip of Warren’s address to Powell below.
Powell said that the Federal Reserve was “not trying to provoke” a recession and doesn’t think it will need to provoke one.
Economists polled by The Wall Street Journal predicted the likelihood of a recession in the next year is 44%, compared with 28% in April.
The newspaper called the percentage a “level usually seen only on the brink of or during actual recessions.”