The House is Holding Yellen’s Feet to the Fire

Janet Yellen,
Chair of the Board of Governors
Federal Reserve System

One of the major topics expected to be covered when Federal Reserve Chairman Janet Yellen testifies before Congress in early February is the Fed’s perceived lack of transparency when it comes to monetary policy, which was a main point of contention in Yellen’s previous Congressional testimony.

Yellen is scheduled to appear before the House Financial Services Committee on February 10 for the Fed’s semi-annual Monetary Policy Report to Congress. It will be her first appearance before the Committee since July 2015 and her first since the Fed’s historic liftoff which occurred in December. The Federal Open Market Committee concluded its first meeting of 2016 on Wednesday with the announcement that the federal funds rate would remain it its current level of 1/4 to 1/2 for the time being.

In Yellen’s testimony before the House Committee in July, Committee Chairman Jeb Hensarling (R-Texas) was critical of a perceived lack of transparency on the part of the Fed, stating that the central bank needed to be “more predictable” when it comes to monetary policy.

The House passed H.R. 3189, known as the Fed Oversight Reform and Modernization Act (FORM Act), with bipartisan support, in November. The bill provides the Fed with a framework for communicating monetary policy decisions more transparently by requiring the Fed to generate a monetary policy strategy of its own choosing, in order to provide the American people with more transparency about the factors that lead to the Fed’s monetary decisions. The Act would also eliminate the restrictions on the Government Accountability Office’s ability to audit the Fed, allowing the GAO to conduct an audit of the Fed anytime there is a policy change.

Jeb Hensarling (R-Texas) Chairman of the House Financial Services Committee

Prior to the House vote in November, Yellen wrote a letter to Speaker of the House Paul Ryan and House Democratic leader Nancy Pelosi urging them to reject the FORM Act. It passed by the vote of 241 to 185 on November 19, 2015.

“Our economy would be healthier if the Federal Reserve was more predictable in its conduct of monetary policy, more transparent about its decision-making, and more accountable when regulating,” Hensarling said. “The House-passed Fed Oversight Reform and Modernization Act, the FORM Act, accomplishes these goals. The FORM Act will help expand economic opportunity because consumers, job creators and investors will all have more confidence in making financial plans. The more Americans can understand how the Fed will act, the better they can plan for the future.”