Media mogul Steve Forbes, chairman of Forbes Media, has warned that the Federal Reserve is “inflicting unnecessary pain” on the U.S. economy with its interest rate hikes after Fed Chair Jerome Powell said the Fed is prepared to raise interest rates at a faster pace. He also pointed out “the fundamental flaw in central bankers’ and most economists’ approach.”
Media Mogul Steve Forbes Warns About Fed Policies
Steve Forbes, chairman of Forbes Media, warned on Thursday that the Federal Reserve is “inflicting unnecessary pain” on the U.S. economy. His warning followed Fed Chair Jerome Powell’s testimony before the Senate Committee on Banking, Housing, and Urban Affairs.
“Federal Reserve Chairman Jerome Powell sent financial markets reeling when he told a Senate hearing Tuesday that our central bank is ready to push up interest rates higher and at a faster pace than previously anticipated,” Forbes began. The media mogul noted that Powell’s reason was that the U.S. economy “has been showing unexpected strength; therefore, the Fed may have to do more to suppress it.” The executive stressed:
Here we get to the fundamental flaw in central bankers’ and most economists’ approach: They think prosperity causes inflation. To cure that, they work to depress the economy.
“They’ve never understood the definition of inflation: reducing the value of a currency, usually by creating too much of it,” the Forbes chairman emphasized, adding:
Price increases from natural disasters, wars, Covid lockdowns or economy-killing regulations and taxes cannot be cured by jacking up interest rates. The Fed is — and will be — inflicting unnecessary pain.
Powell told senators during the congressional hearing on Tuesday that “From a broader perspective, inflation has moderated somewhat since the middle of last year but remains well above the [Federal Open Market Committee] FOMC’s longer-run objective of 2%.” He explained: “We continue to anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”
Several Fed officials have also said that more rate hikes are needed to curb inflation. Last week, Bank of America warned that the Fed will keep hiking interest rates until the “point of pain” for consumer demand. The president of the Federal Reserve Bank of Atlanta has warned of “disastrous results” if the Fed loosens its polity prematurely. Meanwhile, economist Mohamed El Erian said last month that the Fed cannot reach its inflation target of 2% without “crushing” the economy.
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