Washington D.C. – Today the Fed announced an interest rate hike of 25 basis points – the 11th increase in 16 months. The ill-advised decision disregards the difficult financial choices millions of Americans have already faced under the previous rate hikes, as well as dire warnings from a chorus of lawmakers, academics, and economists that the economy could tip towards a recession if rate hikes continue. While the Fed’s aggressive interest rate strategy risks millions of American jobs, it has failed to get to the root of the corporate greed epidemic that has fueled inflation.
The Fed’s unprecedented interest rate hike spree has done little to curb corporate price-gouging. Instead, it’s made it way too expensive for many average Americans to borrow money,” said Liz Zelnick, Director of Accountable.US’ Economic Security & Corporate Power.
“No thanks to the Fed, fewer Americans are able to buy homes or new cars, and manufacturing jobs are less in demand. For the Fed to raise rates again after a brief pause is like ripping the bandages off deep economic wounds that haven’t begun to heal. Rather than jeopardize millions of jobs and keep families from getting ahead, the Fed should take a seat and let Congress go after corporate profiteers driving up costs.”
SEVERE ECONOMIC DAMAGE DONE BY FED’S PRIOR INTEREST RATE HIKES:
- Most Americans Hurt by High Rates: CBNC, 7/21: Most Americans said rising interest rates have hurt their finances in the last year. About 77% said they’ve been directly affected by the Fed’s moves, according a report by WalletHub. Roughly 61% said they have taken a financial hit over this time, a separate report from Allianz Life found.
- Auto Loan Rejection Surge: USA Today, 7/19: More cars are finally available and prices are leveling off, but buyers now face borrowing challenges that could keep them from getting a new ride. The Federal Reserve said the rejection rate for auto loans in June rose to 14.2% from 9.1% in February, the last time the survey was taken. That was the highest level since this data was first collected in 2013 and for the first time, exceeded the application rate. Lenders are pulling back, leery of borrowers who have struggled with high inflation and a surge in interest rates the last couple of years, and have piled on debt to make ends meet.
- Manufacturing Layoffs: Reuters, 7/3: U.S. manufacturing slumped further in June, reaching levels last seen when the nation was reeling from the initial wave of the COVID-19 pandemic, but price pressures at the factory gate continued to deflate, a silver lining for the economy. Shrinking activity left factories resorting to layoffs, the survey from the Institute for Supply Management (ISM) showed on Monday. […] Risks of a downturn have, however, increased as businesses and consumers deal with the 500 basis points worth of interest rate increases from the Federal Reserve since March 2022, when the U.S. central bank embarked on its fastest monetary policy tightening campaign in more than 40 years.
- ‘Homeownership remains out of reach for many first-time buyers’: Politico, 7/12: Inflation eases but Fed can’t conquer housing prices: [T]he cost of shelter soared by 7.8 percent in a reflection of post-pandemic rent spikes, part of a trend that has defied the Federal Reserve’s aggressive interest rate hikes over the past year. So even as the Biden administration cheers signs that price rises across the economy have started to cool, homeownership remains out of reach for many first-time buyers, who are already facing a severe lack of supply. […] “Big picture, the Fed tightening has had a huge impact on the housing market; when mortgage rates rose, you saw demand cool,” Zillow senior economist Orphe Divounguy said.
CORPORATE GREED UNFAZED BY FED’S AGGRESSIVE STRATEGY:
- Profits & Investor Handouts Soar Among Top 5 Pharma Companies Amid Industry Price Hikes: A new analysis from Accountable.US found that the five largest U.S. pharmaceutical companies by market cap saw profits rise steadily from FY 2021 to FY 2022, as price increases and acquisitions of competing firms led to generous shareholder handouts at the expense of Americans struggling to afford life-saving medicine. While manufacturers reportedly upped prices on at least 350 drugs in the U.S. in January, Accountable.US’ review found these top drug companies reported combined earnings of $81.9 billion — an over $8.8 billion increase from 2021 — while combined stock buybacks and dividends increased by $4.4 billion and $2.5 billion, respectively.
- Big Food Among S&P 500 Companies That Inflated Prices Despite Bigger Profits and Investor Handouts: A recent Accountable.US report found many of the largest general consumer S&P 500 companies have admitted to benefiting from increased prices as their net profits increased year-over-year and they rewarded shareholders with billions in new shareholder handouts. That includes General Mills that raised prices as it saw its net income increase 16.5% to $2.7 billion in its FY 2022 and saw continued profit increases in the first nine months of its FY 2023. Additionally, Accountable.US found Tyson––whose executives touted seeing “significant pricing power of our portfolio with a year-over-year increase of 7.6%”––saw its net income increase from $3 billion in FY 2021 to over $3.2 billion in FY 2022 and rewarded shareholders with $1.35 billion in handouts––$652 million more than the previous year, including a 948.5% increase in stock buybacks.
- Largest U.S. Landlords Reaped Huge Profits Amid Double-Digit Rent Hikes: An Accountable.US report from April found the six largest companies represented in the multifamily and single-family rental industry reaped $4.3 billion in net income in FY 2022 — over $1.3 billion more than the previous year – as they imposed double-digit rent increases, charged excessive junk fees, and engaged in “abusive tactics” to evict tenants.