Three Democratic senators, including Elizabeth Warren of Massachusetts, are calling on the Federal Reserve to implement a 0.75% interest rate cut this week. In a letter sent to Fed Chair Jerome Powell on Monday, Warren, along with Senators Sheldon Whitehouse and John Hickenlooper, emphasized the need for more aggressive action to prevent a potential recession.

“If the Fed is too cautious in cutting rates, it would needlessly risk our economy heading towards a recession,” the senators wrote. They argued that swift and significant rate cuts are necessary to protect the labor market, particularly as recent data suggests a cooling jobs market. The senators also warned that further delays could exacerbate economic risks.

This letter comes ahead of the Federal Reserve's meeting, where officials are expected to announce the central bank’s first rate cut since 2020. The size of the cut, however, remains uncertain, with possibilities ranging from a quarter-point to the 0.75% cut requested by the senators. Fed officials have been tight-lipped about the exact figures, although they have signaled the likelihood of some form of reduction.

The letter from the senators adds to the political pressure facing the Federal Reserve as it navigates monetary policy in the lead-up to the 2024 presidential election. While the Fed traditionally operates independently, it continues to face scrutiny from political figures on both sides of the aisle. Former President Donald Trump has publicly expressed concern over the Fed’s potential rate cuts ahead of the election, arguing that the central bank should avoid adjusting rates in the run-up to the vote.

The Fed’s policy rate is currently set at its highest level in over two decades, in the range of 5.25% to 5.5%. The decision from the upcoming meeting is expected to have significant implications for the broader U.S. economy, with the potential to affect markets, employment, and consumer spending.

A Fed spokesperson confirmed that the central bank had received the letter from the senators and intends to respond in due course.

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