WASHINGTON (AP) — Federal Reserve Chair Janet Yellen said Wednesday it would be a serious mistake for Congress to require the nation's central bank to adopt a formal policy rule to guide its decisions on setting interest rates.
Yellen faced a barrage of questions from Republican lawmakers about legislation that they are supporting to make the Fed more accountable and make its policy decisions more transparent. One of the requirements would have the Fed adopt a policy rule that would govern future decisions and would have the Government Accountability Office audit the rule.
Yellen rejected that approach and said the Fed needed the flexibility it now has to make policy decisions.
"It would be a grave mistake for the Fed to commit to conduct monetary policy according to a mathematical rule. No central bank does that," Yellen told lawmakers.
She said that while the House legislation which was introduced last week would allow the Fed to deviate from any rule that it set up, any such change would trigger an audit by the GAO, the auditing arm of Congress. She said this procedure would "essentially undermine central bank independence in the conduct of monetary policy."
Yellen's comments came during an appearance before the House Financial Services Committee to present the Fed's semi-annual economic report to Congress.
Continue reading this story on the...