Warren advocates for a bigger Fed rate cut, even as Wall Street cheers

Massachusetts Sen. Elizabeth Warren said the Federal Reserve interest rate cut to curb inflation was not aggressive enough and came too late for American families. Fed Chair Jerome Powell announced a half percent cut to benchmark interest rates on Wednesday — the first cut since March 2020. The move was cheered by Wall Street as a boon for the economy and will help make mortgages, car loans and business loans more affordable. While a half percent cut is considered large, the Senator from Massachusetts wanted more. Warren, along with two senate colleagues, sent a letter to Powell's office on Monday ahead of the announcement, advocating for the Fed to cut rates by three-quarters of a percent. "A half a point is a big cut, and I understand that," said Warren in an appearance on WBUR's Morning Edition. "It is also partly a recognition that Jerome Powell has waited too late to cut these rates." Warren said there are persistent signs that inflation is slowing, but the Fed's delay in cutting interest rates has hurt consumers. "Homeowners are saying 'I can't afford to buy a house,' but it's also people with car loans and credit cards. They have all been paying more because the Fed has kept interest rates so high," said Warren. Interest rates are not at a historically high level. But they are well above the rock-bottom rates that consumers and businesses enjoyed in the decade-plus following the 2008 financial crisis. Warren said aggressive rate cuts, like the one she proposed, aren't a sign the market is headed for a recession, but rather an acknowledgement that families need relief from high costs. Warren also responded to comments made by former President Donald Trump on the campaign trail this week on the cuts. At an event in New York, Trump said the Fed's move show that the economy is in poor shape, "assuming they're not just playing politics," suggesting that Powell took the rate action to sway the election. Advertisement Warren said the cuts are not related to the presidential race. "I have not been shy about criticizing Jerome Powell when I disagree with him on economic policy, but there is absolutely zero reason to believe that he is acting in a political manner," she said. Warren said she expects rates to be cut again in November because "the interest rate is still too high." When rates fall, the interest that consumers can earn in bank savings accounts — which has been at its highest level, around 5% — also declines.