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- The Federal Reserve will make its next interest rate decision on Wednesday.
- Predictions say the central bank will raise rates by 25 basis points after a pause in June.
- Sen. Elizabeth Warren told Insider another hike could "be devastating for our economy."
The nation's central bank is gearing up to make its next big move this week, and Massachusetts Sen. Elizabeth Warren is worried.
On Wednesday, the Federal Reserve will decide whether it will raise interest rates again, or maintain the pause on hikes it implemented in June. Market participants expect the Fed will once again hike rates by 25 basis points — the CME FedWatch Tool, which analyzes various derivatives prices to estimate probabilities for changes to interest rates, predicted a 98.9% chance the Fed will make a 25 basis point increase.
But Warren is cautioning Fed Chair Jerome Powell against another hike.
"Already, we're seeing warning signs – including a rise in unemployment for Black workers – that the Fed resuming its aggressive rate hike campaign could be devastating for our economy, and disproportionately harm marginalized communities," Warren told Insider. "Chair Powell must maintain the Fed's pause on rate hikes and avoid further rate increases that threaten our economy and risk throwing Americans out of work."
After ten consecutive interest rate increases, the Federal Open Market Committee in June held rates steady as it continued its fight to get inflation down to its target 2% level. And the latest inflation data, measured by the Consumer Price Index, suggested the Fed's efforts are working, with the index rising 3.0% year-over-year in June, down from 4.0% in May.
But Powell cautioned the June pause is no indication that the hikes are over.
"The main issue that we're focused on now is determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time—so that the pace of the increases and the ultimate level of increases are separate variables, given how far we have come," Powell said during the June press conference. "It may make sense for rates to move higher but at a more moderate pace."
Still, Warren and some of her Democratic colleagues have been critical of Powell's continued rate hikes. During a Senate hearing in March where Powell testified on monetary policy actions, Warren asked him to "speak directly to the 2 million hard working people who have decent jobs today, who you're planning to get fired over the next year," referring to potential unemployment caused by economic tightening.
Powell responded at the time that he would "explain to people more broadly that inflation is extremely high and it's hurting the working people of this country badly. All of them, not just 2 million of them, but all of them are suffering under high inflation and we are taking the only measures we have to bring inflation down."
Democratic Sen. John Hickenlooper also sent a letter to Powell in January urging him to pause the hikes, saying that they "will only make it more expensive for small businesses to fund their operations. It will also put a drag on consumer spending, which accounts for two-thirds of the economy."
Still, Powell has warned Americans are likely in for more hikes this year as the Fed continues its war on inflation.
"A strong majority of committee participants expect that it will be appropriate to raise interest rates two or more times by the end of the year," Powell said during a conference at the end of June. "Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go."