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GOP lawmakers argue for Fed to focus solely on inflation

Republican lawmakers indicated April 4 that they will continue to push for more transparency and monetary policy oversight rules for the Federal Reserve.

"Well before the recession and to this day the Fed has chased a Keynesian nirvana," Rep. Andy Barr, R-Ky., said during a Monetary Policy Subcommittee hearing on the central bank's mandate and governance structure. Barr, the chair of the subcommittee, went on to argue that the administration of former President Obama had "cajoled" the Fed into pursuing an aggressive monetary policy.

He added that he wants "a more disciplined and transparent monetary policy."

Conservative lawmakers on the House panel argued that they may consider narrowing the Fed's mandate from a dual focus on employment and price stability to one solely based on managing inflation.

"Giving the Fed multiple, at times conflicting objectives merely creates unsatisfactory outcomes," Rep. Mia Love, R-Utah, said.

One witness called to testify for the panel, Dr. Charles Calomiris, a professor of finance and economics at Columbia Business School, said the central bank had failed to provide long-run stability for the U.S. financial system, missed repeatedly on its growth forecasts and became more heavily politicized. He told lawmakers that the bank needed a number of internal governance, policy formulation reforms and structural changes to achieve better policy. He also urged lawmakers to refocus the central bank's mandate to controlling price levels.

"Improving the Fed's primary mandate to focus on price stability is a reform that is long overdue," Calomiris said. "Price stability is an achievable long-run objective, and thus the Fed can be held accountable for achieving it."

Democrats on the panel, however, expressed skepticism about reducing the Fed's focus on labor markets. "I'm on record opposing eliminating considerations of employment from the dual mandate," said Gwen Moore, D-Wis., the top-ranking Democrat on the panel. She added that such a change would be "counterproductive."

She also took aim at broader Republican efforts to remake the central bank and its oversight. She said conservatives desire to tie interest rate policy to fixed monetary policy rules.

"I grow increasingly anxious with the committee's preoccupation with infusing politics into the Fed," Moore said, "constraining the Fed from executing its mission by … adding unworkable formula rules to monetary policy and restructuring the Fed to give banking interests even more weight on decisions."