Groundwork’s Chief Economist Urges Caution Ahead of FOMC Meeting

January 27, 2023

Groundwork’s Chief Economist Urges Caution Ahead of FOMC Meeting

Ahead of the first Federal Reserve Open Market Committee meeting of the year, a chorus of experts across the ideological spectrum are sounding the alarm on the Fed’s approach to inflation. Groundwork’s Chief Economist Dr. Rakeen Mabud provided the following statement:

“It is abundantly clear that we don’t need mass joblessness to tamp down inflation. Inflation is cooling and our economy remains strong. Yet the Fed is hell-bent on boosting rates further and putting millions of workers in jeopardy. Avoiding a devastating and completely unnecessary recession is simple: stop raising interest rates.”

What the Experts Are Saying

Gerald Epstein | University of Massachusetts-Amherst

“This focus on inflation, by promoting high unemployment, contradicts the dual mandate given to the Fed by Congress. Specifically, the Federal Reserve Act mandates that the central bank conduct monetary policy ‘so as to effectively promote the goals of maximum employment, stable prices, and moderate long-term interest rates.’ Yet the Fed has been laser-focused on keeping inflation extremely low no matter the harm it may cause to the labor market or the economy.” (1/19/23)

David Kelly | JP Morgan

“I think [the Federal Reserve] need to stop. This is a war that they have won, and they are in danger of tipping the economy into a recession. I think they are making the fiscal problem worse.” (1/12/23)

William Spriggs | AFL-CIO

“If you become unemployed, then all bets are off, because you can’t afford anything…There is no period in which the Fed pursued a deflationary policy in which low-income people won. The median income of Black families falls, and it takes years to come back. Child poverty spikes.” (1/10/23)

Judy Shelton | Independent Institute

“The Fed’s plan only works if employees are willing to accept wages lower than what would keep them even with inflation. So, I think from an economic point of view that’s a dubious strategy, and I think morally it’s questionable. I don’t think a government agency should base its strategy and carry out its plan accordingly in a way that requires people to get less than they should be compensated because of inflation, which they had nothing to do with.” (1/9/23)

Alex Williams | Employ America

“If the Fed wants to cause a recession, they seem to be in no rush to defend it transparently. Recessions have catastrophic and deeply unequal consequences for those who lose jobs and wages as a result. The case for the Fed’s intentions is a case that the human costs of a substantial unemployment increase are justified.” (1/9/23)