Rep. Mike Pence, R-Ind., chairman of the House Republican Conference, introduced a bill on Tuesday requiring the Federal Reserve to promote price stability while no longer seeking maximum employment.
The proposal has the support of Sen. Bob Corker, R-Tenn., a member of the Senate Banking Committee, who said the Fed's dual role is “confusing to the market,” and Rep. Paul Ryan, R-Wis., who will chair the House Budget Committee in the next Congress.
A 1977 amendment to the Federal Reserve Act requires the central bank to promote both stable prices and full employment. The Fed's Nov. 3 decision to buy $600 billion of Treasuries in a bid to reduce unemployment has drawn criticism from officials in China, Germany and Brazil, and U.S. economists such as John Taylor and Michael Boskin.
Fed spokeswoman Michelle Smith said the central bank “is not seeking a change to its statutory mandate,” and “the dual mandate is appropriate.”
Republicans are advocating a monetary strategy that was championed by Chairman Ben S. Bernanke before he joined the Fed. Mr. Bernanke, a former Princeton University professor, co-wrote a book on inflation targeting in 1999, where he said that when inflation is adopted as the primary goal, policymakers “are accepting the reality of what monetary policy can and cannot do.”
The Fed chairman is still interested in making the central bank's inflation goal more explicit in a way that conforms with the full employment goal, which changes over time.
“The onus for growing jobs in this country should not fall on the Fed,” Mr. Pence said at a news conference. “It should fall on policymakers in this administration and in the coming Congress.”
He wants the proposed legislation to be considered in Congress' current lame-duck session, said Matt Lloyd, the communications director for the Republican conference.
House Financial Services Committee Chairman Barney Frank, D-Mass., said on Monday that “it would be a very dumb fight” for Republicans to press legislation to change the Fed's mandate.