House Panel Weighs Bill to Make Price Stability Fed’s Sole Mandate
Summary
- A U.S. House panel is reviewing an amendment to the Federal Reserve Act that would scrap the Fed’s dual mandate and leave only price stability.
- The bill would remove the phrase “maximum employment, price stability” from Section 2A of the Federal Reserve Act and leave only “price stability.”
- Markets are focused on how the discussion over changing the Fed’s mandate could affect future interest-rate policy and financial markets, as well as whether the bill will pass and the debate over Fed independence.
Forecast Trend Report by Period
The U.S. House is weighing legislation that would eliminate the Federal Reserve’s dual mandate and leave price stability as its sole objective, a move that could reshape the central bank’s policy framework.
Nick Timiraos of The Wall Street Journal reported on May 13 that the House Financial Services Committee is reviewing an amendment to the Federal Reserve Act.
The bill would strip out the Fed’s maximum-employment mandate, leaving only price stability in place of its current dual mandate of maximum employment and price stability.
Specifically, the proposal would amend Section 2A of the Federal Reserve Act by deleting the phrase “maximum employment, stable prices” and retaining only “price stability.”
Timiraos wrote that it is worth considering whether the Fed would have cut interest rates last year if the measure had already been in force.
The Fed currently operates under a policy framework that considers both employment and inflation.
Markets are watching how efforts to change the Fed’s mandate could affect future interest-rate policy and financial markets. Whether the bill advances, and the broader debate over Fed independence, remain key variables.
JH Kim
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