Republicans: Fed should focus on fighting inflation, not on job creation
A second top Republican is arguing that the Federal Reserve's mandate from Congress should be changed so that the central bank is no longer charged with maintaining low unemployment.
Sen. Bob Corker (R-Tenn.), a member of the Senate Banking Committee, has called for the Fed's current "dual mandate" -- to pursue maximum employment and price stability -- be amended to order the central bank to focus only on maintaining stable prices.
"It is time that we work to clarify the mandate of the Federal Reserve. Providing our central bank with a clear and explicit focus on keeping inflation low will serve America better than the broader mandate approach we have today," Corker said in a statement issued by his office.
Rep. Mike Pence (R-Ind.) broached the same idea in a CNBC interview Monday.
The proposal comes as congressional Republicans are denouncing the Fed for its decision two weeks ago to buy $600 billion in Treasury bonds in a bid to boost the ailing economy. Fed Chairman Ben S. Bernanke has described the move as a logical action to fulfill the central bank's mission. He argues that unemployment is far too high (at 9.6 percent) and inflation running below the 2 percent or so level that Fed leaders believe to be optimal for stable prices in the long run.
Corker announced his new position after a closed-door meeting with Bernanke on Monday, at which the Fed chairman briefed the Tennessee senator on the recent action.
"At this meeting, Corker probed Chairman Bernanke on recent actions by the Fed," the statement said. "As a result of lengthy research and discussion, Corker believes now is the time to direct the mandate of the Fed to focus only on price stability."
Having the Fed focus only on stable prices would make its mandate more in line with that of the European Central Bank. That bank is legally charged with maintaining inflation at or just below 2 percent but has no formal responsibility to juggle that with trying to keep unemployment low.
Amending the Fed's responsibilities would require Congressional action. The current dual mandate was put in place in 1978 as part of the Humphrey-Hawkins Full Employment Act. However, with Democrats maintaining their majority in the Senate, there is little chance of such a change in the near term.
| November 16, 2010; 10:40 AM ET
Categories: Federal Reserve
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