Lawmakers Urge Fed To Leave Interest Rates Alone Congress Worries About Effects Of Increases

Nervous that efforts to slow the economy could upset the political landscape, 64 members of Congress urged the Federal Reserve on Friday not to raise interest rates again.

“The domino effect of their actions will be felt by farmers, businesses, employees and consumers in their everyday lives,” said House Minority Leader Dick Gephardt, D-Mo. “Things are moving slowly in the right direction. Let’s not stop them now.”

Gephardt was joined by 58 other House members and five senators - all Democrats except Rep. Jim Bunning, R-Ky. - in dispatching a letter to Federal Reserve Chairman Alan Greenspan contending that another increase in rates could result in lower wages and more unemployment.

“Raising interest rates in a pre-emptive strike against inflation risks damaging economic growth and prosperity, and is unwarranted,” they said.

The Federal Reserve’s policy-makers plan to meet May 20 to consider whether to raise interest rates, and there have been indications such an increase could occur.

If there are further interest rate increases, their full force probably would not be felt in economy until a year later - just as congressional reelection campaigns are hitting their stride.

In the letter, the lawmakers said they “hear daily from our increasingly anxious constituents” who are worried that increases mean higher mortgages and credit card payments and lower wages.

Gephardt and his colleagues said the Fed is too preoccupied with curbing inflation that is not the problem it once was, and that interest rates serve mainly to enrich banks and Wall Street speculators at the expense of working people.

The political uneasiness could mean a rough Senate confirmation process for Clinton’s choices to fill two vacancies on the seven-member Fed board - Michigan professor Edward M. Gramlich and New York banking consultant Roger W. Ferguson Jr.

“I’m not about to rubber-stamp anybody. I think we’ll have to take a long, hard look at who these individuals are,” Sen. Tom Harkin said.

Gephardt said further interest rate increases were particularly ill-timed now because thousands of people will be coming off welfare rolls and looking for work under reforms passed by Congress last year. Those jobs, he said, depend on continued economic growth.

“We’re going to suffocate that growth and make it impossible for them to go to work. It’s a catch-22,” he said. “It’s cruel and it’s wrong.”

Although Democrats are leading the campaign, some Republicans are grumbling as well.

Rep. Jim Saxton, R-N.Y., chairman of the Joint Economic Committee, said the Federal Reserve should “clarify the basis of current monetary policy” and that interest rate hikes are not warranted given that inflation is in check.