Yellen Stands Against Rate Rule
11 February 2016 - 1:40AM
Dow Jones News
Federal Reserve Chairwoman Janet Yellen on Wednesday reiterated
her opposition to legislation that would force the Fed to follow a
mathematical rule for setting interest rates.
Testifying before the House Financial Services Committee, Ms.
Yellen conceded the economy is "in many ways close to normal," but
she said conditions still don't warrant a rules-based approach to
setting policy.
"I believe, and I think most of my colleagues would agree, that
we shouldn't mechanically follow that rule or any other rule but
that we need to take into account how the economy is performing,"
Ms. Yellen told the committee.
The House in November passed legislation that would require the
Fed to abide by mathematical a rule when setting rates. The bill
also would mandate new audits of the central bank and restrict its
emergency-lending powers. Supporters of the legislation say it
would make monetary policy more predictable and open the central
bank to more outside scrutiny.
In a November letter to House leaders, Ms. Yellen warned the
bill "would severely impair the Federal Reserve's ability to carry
out its congressional mandate and would be a grave mistake,
detrimental to the economy and the American people."
Rep. Jeb Hensarling (R., Texas), the panel's chairman, read a
separate letter Wednesday signed by several economists, including
Nobel Prize winners Lars Peter Hansen, Robert Lucas and Edward
Prescott, supporting the legislation and arguing that a rules-based
approach would be appropriate and wouldn't threaten the Fed's
independence.
Of Ms. Yellen's letter, Mr. Hensarling said: "I would just
caution you when you use such apocalyptic and hyperbolic language
whether or not this undercuts your ability as Fed chair."
Write to Kate Davidson at kate.davidson@wsj.com
(END) Dow Jones Newswires
February 10, 2016 20:25 ET (01:25 GMT)
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