Senate Budget Committee Chairman Sheldon Whitehouse, D-R.I., and Ranking Member Brendan Boyle, D-Penn., urged Federal Reserve Chair Jerome Powell to reduce interest rates in a letter sent ahead of this week’s Federal Open Market Committee meeting.
The lawmakers expressed concern about the prolonged economic harm caused by elevated rates and called for immediate action to ease financial pressures.
“The Federal Reserve should begin easing interest rates as soon as your June 2024 Federal Open Market Committee Meeting,” the letter reads. “Lowering rates now will ensure that we do not cause unnecessary and harmful economic damage.”
High rental costs might be overstating inflation, thereby suggesting that the Consumer Price Index may not accurately reflect the current economic conditions, particularly in the housing market, according to the Senators.
The Senators write that “because the CPI measures mortgage costs as the equivalent rental cost if the mortgage holder were renting, it is likely grossly overstating the actual cost of housing that homeowners face.”
In other words, Whitehouse and Boyle argue that consumers are actually paying less for housing than is reflected by the CPI.
“Not only are high rental costs overstating inflation numbers, keeping rates higher for longer will do nothing to solve the housing crisis, and instead may be exacerbating it by increasing the cost of new housing construction, restricting the supply of listings, and making it more expensive for families to buy new homes,” the Senators wrote.
The Democratic Senators are urging the Federal Reserve to cut the federal funds rate from its current, two-decade-high of 5.5 percent.
Senator Jacky Rosen joined Whitehouse and Boyle in her own letter to the Federal Reserve.
“Reducing rates will reduce the costs of renting, buying, and building housing, reducing Americans’ single highest monthly expense,” she wrote.
