Federal Reserve Chairwoman Janet Yellen said she is prepared to “forcefully” argue against efforts to advance Audit the Fed legislation in the next Congress.
Asked about efforts by some lawmakers to subject the Fed to more extensive review, Yellen said Wednesday that the Fed would be less effective at its job if its long-term decisions were subjected to “short-run political interference.”
{mosads}“I do think central bank independence is very important … to make sure we can make the decisions we think are best,” she told reporters.
Yellen made then remarks as the ongoing campaign to enact Audit the Fed legislation is likely to gain traction in the new Congress. Republicans who have largely backed such legislation now control both chambers of Congress, and the new head of the Senate Banking Committee, Sen. Richard Shelby (R-Ala.), is a vocal skeptic of current Fed operations.
The most likely avenue for Fed action in the next Congress is by again taking up Audit the Fed legislation. Such a bill would subject the Fed’s monetary policy deliberations to review by the Government Accountability Office and has easily passed the House of Representatives with bipartisan backing. Senate Majority Leader Harry Reid (D-Nev.) previously blocked consideration in the Senate.
With Republicans set to take control of the Senate, such legislation appears to have a clear path forward. But Yellen and her predecessor, Ben Bernanke, have both openly criticized such measures, warning it could subject the Fed to undue political pressure.
“The ability of the central bank to make the decisions about monetary policy that it regards as in the best longer run interests of the economy free of short run political interference is very important,” Yellen said Wednesday. “History shows, not only in the United States but around the world, that central bank independence promotes better economic performance.”
Yellen said she would “very open” to looking at ways for the Fed itself to improve on transparency, while at the same time noting that the vast majority of the Fed’s operations are subject to outside review.
“We should be accountable, and we are accountable to Congress,” she said.