Fed fights measure designed to limit its ad hoc actions

The latest print edition of National Review features the following blurb:

Fed chairman Janet Yellen is denouncing a bill that she says would “severely impair” monetary policy. It is, in actuality, an exceedingly modest piece of legislation. It would direct the Federal Reserve to adopt a rule to guide monetary policy. It could change that rule over time, and it could deviate from the rule. But it would have to provide an explanation. There is a powerful case for a more rule-bound Fed — a case that includes the benefits that would come from the markets’ being able to predict its behavior more accurately. And while the counterargument that no rule is perfect has theoretical merit, the poor track record of a Fed with broad discretion and limited accountability strengthens the practical case for this move. The debate over rules vs. discretion in monetary policy is a longstanding one, and there are honest differences of opinion. We suspect, however, that the Fed is attacking this bill with unusual vehemence because it is a bureaucracy defending its prerogatives.

One of the most vocal critics of an activist Fed is Stanford and Hoover Institution economist John B. Taylor, the 2015 N.C. State University Pope Lecturer. In the latest edition of Carolina Journal Radio, Taylor highlights themes from his book about economic “first principles.”

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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