Opinion | While the Fed Waits, Our Pain Accumulates

While all eyes are on Donald Trump and Kamala Harris, one of the largest factors influencing the mood of American voters is playing out elsewhere. The Federal Reserve’s handling of inflation is souring the public on our economy, harming vulnerable Americans, slowing our fight against climate change — and hindering the fight against inflation itself.

For the past several months, the Fed has resisted lowering interest rates in an environment that clearly demands lower rates. Take its favored inflation measure, the Personal Consumption Expenditures price index. The Fed repeatedly stated that it would not lower rates until it had confidence the P.C.E. was headed back toward 2 percent. Yet we are already there: While the annualized P.C.E. stands at 2.5 percent, the three-month annualized P.C.E. is just 1.5 percent.

While the Fed keeps waiting, the pain keeps accumulating. By jacking up rates at a speed not seen in over four decades, and then keeping them at or near 25-year highs, the Fed has all but frozen the housing market and kept a generation of potential first-time home buyers stuck in the rental market, where price spikes have been especially steep. That trend has been devastating for many people — homeownership is where many middle-class Americans store most of their wealth, and the average homeowner gained about $210,000 in equity over the last decade.

There is also the damage that unnecessarily high interest rates are inflicting on our battle against climate change. Clean energy projects typically involve heavier upfront financing costs that become more expensive with higher rates. A 2020 report estimated that raising rates from 3 percent to 7 percent could increase the cost of a renewables project by roughly a third for projects in the U.S. And of course, higher interest rates have hurt poorer consumers who depend on variable credit card rates and auto loans.

In the meantime, some economists believe the risks of recession are rising: Unemployment is now at 4.1 percent, compared with 3.7 percent in January.

Beyond all of this, there is an even more fundamental reason the Fed should reverse course sooner. It’s unclear whether interest rates are the best tool to reduce the kind of inflation the United States has been experiencing.