Representative Kevin Brady, the top Republican on the Joint Economic Committee, will introduce legislation March 8 that would narrow the Federal Reserve’s focus to price stability and eliminate its full-employment mandate.
“The Federal Reserve’s monetary experimentation of the last decade must end,” the Texas lawmaker said in remarks prepared for delivery today in Washington. “Congress should give the Federal Reserve a single mandate for price stability, and the Federal Reserve should return to a rules-based system of inflation targeting to achieve that mandate.”
The legislation, known as the Sound Dollar Act, would also restrict the central bank’s balance sheet to Treasury securities, speed the release of transcripts from Federal Open Market Committee meetings and give the Fed’s 12 regional presidents permanent votes on monetary policy.
Brady and his staff have held discussions with other congressional Republicans and with William C. Dudley, president of the Federal Reserve Bank of New York. Brady said Dudley argued in favor of the so-called dual mandate, which requires the Fed to focus on both full employment and low inflation.
Fed Chairman Ben S. Bernanke and his colleagues on the FOMC in January formally adopted a 2 percent goal for the rate of inflation and also pledged to move the economy toward maximum employment, which they currently estimate as a jobless rate between 5.2 percent and 6 percent.
“I strongly applaud Chairman Bernanke and the other members of the FOMC for this step toward a rules-based, inflation-targeting regime,” Brady said.
“However, this is merely a policy statement that could be reversed,” he said in a speech at the American Enterprise Institute, a Washington research group that promotes limited government and free markets.
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