GOP lawmakers go after Federal Reserve and question dual mandate

The GOP lawmakers are up to set the record straight about the balance between the two Federal Reserve mandates of maintaining price stability and ensuring maximum employment. The major question is which of these is most important.

The House’s Monetary Policy, Treasury Market Resilience, and Economic Prosperity Task Force will hold its first hearing today. 

The question of which side of the mandate is more important has been a long-running debate in the nation’s capital. Democrats favor maximum employment, and Republicans emphasize the fight against inflation. 

This has been very clear with the current administration. Clearly, Trump does not care much about employment. He employed Musk, who is known to cut employees, as was the case with Twitter, now X. Federal employees have lost jobs en masse in the first two months of Trump’s presidency.

On the other hand, Democrats have been coming after Musk for the same. They seem to sympathize with the workers who lost their jobs. For them, it is important that Americans feel that they are on their side, more so because they are in the opposition now. 

The Federal Reserve has a dual mandate 

According to reports, the task force chairman, Frank Lucas, intends to investigate whether the Federal Reserve has a dual mandate. He also plans to investigate whether the Fed should use monetary policy rules more in its decision-making to provide the public with greater assurance about the course of policy.

That mandate, as written by Congress, has been in place since 1978. The Federal Reserve uses its power to set interest rates to balance both mandates. 

In addition, House Financial Services Committee Chairman French Hill, R-Ark, said, “For far too long, we have witnessed too many distracting ‘mandates’ diluting the Federal Reserve’s core mission of price stability.”

The panel includes eight Republicans and six Democrats. It may recommend legislation or suggestions for the Fed.

When the House task group was formed, it was the latest of several signs in Washington that the Fed might be getting more attention. The Republicans have been on its case. According to them, the Federal Reserve was too slow to move when inflation rose during the COVID-19 pandemic because its process wasn’t working right.

However, inflation has dropped to less than 3%, a long way below its 40-year high in 2022, and unemployment is still low thanks to the work of Fed Chair Jerome Powell. The rate of people without jobs is today around 4%. This looks like a good balance, even though it might not be the case considering the employment that will be lost this year.

Will DOGE get a chance to audit the central bank?

The Fed is required by law to have its financial statements audited annually by an independent, outside public accounting firm. The Fed makes sure that the external auditor is impartial in all issues related to the audit to protect the independence of the auditor.

Elon Musk suggested that the Federal Reserve should be examined more closely. He told a group of conservatives that he wants to audit the central bank. When asked on stage at the Conservative Political Action Conference if that was what he planned to do, he didn’t say much more than “yes.” This marked the second time this month that the head of DOGE called for a closer look at the Fed. 

The White House wants a stronger relationship with the central bank and other independent agencies. Last month, it issued a new executive order giving Trump’s picks more control over these groups.

The new order clearly states that the Federal Reserve will still have full control over monetary policy, which is the direction of interest rates. However, the White House’s policies and goals will have a bigger impact on how the Fed oversees the country’s biggest banks. This means that it is possible. 

On the other hand, since Trump won the election, Powell has told reporters many times that he plans to stay in his job as chair until May 2026. He clarified that he won’t be leaving even if Trump tries to fire or demote him.

However, Trump has made it clear that he doesn’t want to fire Powell and has toned down his criticism of the Fed’s choices about monetary policy. 

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