Chairman Hill: The Fact Is: Over the Past Decade, We Have Witnessed Too Many Distracting ‘Mandates’ Diluting the Federal Reserve’s Core Mission of Price Stability
Washington,
February 12, 2025 -
Today, the House Financial Services Committee, led by Chairman French Hill (AR-02), is holding the Federal Reserve’s Semi-Annual Monetary Policy Report hearing.
Watch Chairman Hill’s opening remarks here.
Read Chairman Hill’s opening remarks as prepared for delivery:
"Welcome Chairman Powell and thank you for being here today.
"For the last four years, inflation has crushed Americans. Today, it takes $1.21 to purchase what cost $1.00 in January of 2021, as measured by the Consumer Price Index.
"The erosion of Americans’ incomes, and thereby their savings, was caused by a combination of irresponsible fiscal policy and supply chain disruptions but also by a Federal Reserve that was “fighting the last war” – for far too long.
"Chairman Powell, you and I have discussed at previous hearings that the Fed, like many others, assumed that the pre-pandemic era of low inflation and low interest rates would continue.
"This belief was one of the reasons the Fed changed its monetary policy framework in August 2020, only seven months before inflation its four-decade steep march upward in March 2021.
"In hindsight, the adoption of so called “flexible average inflation targeting” appears ill-timed and ill-fitted to the post-pandemic world.
"As the Fed undertakes a review of its monetary policy framework, you must account for the lessons of the last four years and think about what’s ahead over the horizon, not what has been.
"The Fed has made progress on inflation, but the last mile seems to be the hardest. As Bank of America’s economist Stephen Juneau said yesterday – 'Inflation is stuck above target…. with risks to the upside.'
"In August 2022, when inflation was raging, you gave a speech that echoed one of your predecessors as Chairman. You vowed to “keep at it until we are confident the job is done.” It is a vow you should fulfill
"With this morning’s confirmation inflation above target at 3% and making moves upwards, other economic indicators are positive: a low unemployment rate, solid GDP growth, and financial conditions continue to support expansion and investment. This is not to say that there are not risks, some perhaps, unseen.
"However, these risks pale in comparison to the risks that a resurgence of inflation presents.
"Given the already higher prices due to President Biden’s inflation, Americans simply cannot afford further price increases at the grocery store and gas pump.
"Such a resurgence would likely force the Fed to begin another tightening cycle - making mortgages, credit cards, and small business loans unattainable for many households.
"That is why I urge the Fed to forge ahead with its monetary policy duties until you are confident that the mission is complete, and price stability has been restored.
"The fact is: over the past decade, we have witnessed too many distracting ‘mandates’ diluting the Federal Reserve’s core mission of price stability.
"This is the reason we formed the Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity, led by Chair Frank Lucas.
"The Task Force’s purpose is to ensure that the monetary policy actions of the Federal Reserve are put under a magnifying glass and prioritized in this Committee.
"And I look forward to our first hearing in the Task Force.
"I want to turn now to some of the other Fed duties: bank regulation and supervision.
"The Fed was created by Congress to be an independent agency. The intent is to insulate the Federal Reserve’s monetary policy function from political influence.
"Unfortunately, in the last two-and-a-half years of the Biden Administration, the Fed took serious liberties with its independence in the areas of supervision and regulation.
"In law, the Fed Vice Chair for Supervision’s role is to “develop policy recommendations” that are then brought to the Board of Governors for consideration, not to develop partisan proposals without wider input from the Board of Governors and the public.
"In my estimation, over the years, you the and Board have been too deferential to the statutory Vice Chair of Supervision.
"During his tenure, Vice Chair for Supervision Michael Barr was given free rein to use the Fed as a vehicle for partisan goals.
"For example, he proposed unduly raising bank capital levels; pursued climate goals without Congress’ authorization; hindered financial innovation through so called “Novel Activities” Supervision; ignored directives of Congress on regulatory tailoring; and shirked the requirements of the Administrative Procedure Act.
"Vice Chair Barr turned the Basel III Endgame rulemaking into a partisan attempt to propose a massive hike of banks required capital even though the agreed upon international standards were explicitly crafted to be capital neutral.
"This development was especially concerning because he used the Spring 2023 banking turmoil, which had nothing to do with bank capital deficiencies, as justification. As Ambassador Rahm Emanuel said - never let a crisis go to waste!
"In the process, he likely violated the Administrative Procedure Act multiple times.
"The Fed needs to focus on core banking risks, the duties that have been assigned to it by Congress, and adherence to the laws that Congress has passed.
"The Fed has a chance, right now, to get back on the right track and preserve its independence for the long-term benefit of the American People.
"With that, I yield back."
