Press Releases

Today, the Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity, led by Chair Frank Lucas (OK-03), held a hearing exploring the Federal Reserve’s current mandates. The Task Force also discussed how adding additional goals outside the Federal Reserve’s current mandate may hinder its ability to focus on those goals.

On Concerns About the Expanding the Fed’s Mandate:

“This summer marked the 15-year anniversary of that law [Dodd-Frank] and today we are still dealing with the consequences of the dramatic changes it made to our financial system. A concern I continue to have, all these years later, is that broadening the authority of the Fed’s regulatory and supervisory roles ultimately politicizes the institution and threatens its independence," said Subcommittee Chair Lucas.

During his questioning, full Committee Chairman French Hill (AR-02) stated, “I think no matter how many mandates, not only is it [price stability] first among equals, but it’s the only one they [the Fed] can actually so something about… so tell me, maximum employment, how could you even do that? That’s the fiscal responsibility, the states, the taxing power of the Congress. You’re the former CBO Director, it’s too hard isn’t it?” To which Dr. Douglas Holtz-Eakin, President, American Action Forum replied, “Yes. We know where inflation comes from. It comes from the monetary policy and they can control inflation and because they can do that, they even set a target for it… there’s no target for employment because they can’t control an outcome.”

During his questioning, Rep. Troy Downing (MT-02) commented, “I was happy to see the Fed disbanded its internal climate committees early this year because the Fed should not be in the policymaking body on those issues… Can you discuss why it’s a bad idea for the Fed to devote resources to climate change and racial issues when resources could go to conducting monetary policy and supervision?” Holtz-Eakin responded, “It can’t be effective as a policymaker in those areas and it’s not the authorities the Congress gave it. So, it’s neither something it should be doing and something it can do.”

Witnesses Echoed the Work of the Committee:

Dr. Douglas Holtz-Eakin said, “I see three primary advantages to a single mandate. The first is improved accountability of the Fed. It will be much easier for Congress to assess whether the Fed is performing well, improving the accountability of the Fed to Congress. A second advantage is improved predictability and transparency. … Finally, a single mandate would more firmly anchor inflation expectations. A clear and explicit commitment to an inflation target reduces uncertainty, provides forward guidance, and promotes better economic outcomes. … With the Fed operating under a dual mandate, there will always be a temptation for political actors to attempt to put their thumb on the scale to change the Fed’s emphasis on one mandate or the other. In contrast, a single mandate allows no such trade-off and reduces the temptation to interfere with the Fed.”

Mr. Alex Pollock, Senior Fellow, Mises Institute said, “In my view, the Fed in monetary affairs is “independent” in the limited sense of being independent of the Executive, but it is fully accountable to Congress, and indeed Congress has plenary power over it. … I am of the view that the most important thing the Fed can do is to provide stable prices with sound money that the people can and do rely on. This is also its best contribution to maximum employment.”

Mr. Curtis Dubay, Chief Economist, U.S. Chamber of Commerce said, “A Fed Reserve that has as a sole mandate of stable prices and that is independent from political pressure provides the best environment for the Fed to achieve its goals. The Fed’s macroeconomic tools are blunt and how they influence prices is often uncertain, even with years of experience and enormous amounts of research on the topic. The Fed would be best served continuing learning and analyzing how its tools affect prices. Additional mandates divert its attention from what should be its core function of keeping prices stable, risking that it will not do this extremely important job as well as it could. Aside from a mandate of stable prices, the only other function the Fed should serve would be to supervise the banks that are members and to act as the lender-of-last-resort.”