The Latest: Yellen opposes limits to Fed independence
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WASHINGTON — The Latest on Federal Reserve Chair Janet Yellen's testimony to the House Financial Services Committee (all times local):
For a number of years, Republican House members have been pushing legislation that would impose limits on the independence of the Federal Reserve in various ways. These include requiring it to follow a numerical rule for setting interest rates and subjecting the Fed's interest rate decisions to review by congressional auditors.
These proposals never moved forward with a Democrat in the White House. Now with Republican President Donald Trump, GOP lawmakers are making new efforts to win congressional passage of their proposals.
But Federal Reserve Chair Janet Yellen told members of the House Financial Services Committee on Wednesday that she remained strongly opposed to imposing limits on the Fed's independence. She cited drawbacks that she sees in allowing congressional auditors to review Fed decisions on setting interest rates and on reliance on a simple rule to get rates.
"I think central banks all over the world have recognized that an independent central bank that can focus on the long-term health of the economy ... gives rise to a better economic environment," Yellen told the committee.
In addition to clashes over the Fed's role in helping the economy, GOP and Democratic lawmakers used a hearing with Federal Reserve Chair Janet Yellen to argue over the impact of the 2010 Dodd-Frank Act on the nation's financial sector.
President Donald Trump is supporting an effort by congressional Republicans to overhaul the law. They contend that it imposed burdensome regulations that have limited the ability of the banking system to make loans, especially to small businesses.
Democrats argued that bank loans have actually been rising and that repealing the Dodd-Frank law could bring back the dangerous practices that led to the 2008 financial crisis.
GOP lawmakers asked that Yellen put a hold on any banking regulations until Trump is able to nominate an official to be the vice chairman for bank supervision at the central bank. Trump will have the ability in his first year in office to fill three vacant seats on the seven-member Fed board.
Republicans and Democrats on the House Financial Services Committee clashed over the role the Federal Reserve has played in helping the economy to recover from the Great Recession.
GOP lawmakers told Federal Reserve Chair Janet Yellen that the Fed's ultra-low interest rates and massive bond buying had left the economy growing at the slowest pace for any economic recovery in the post-war period. Democrats countered that the Fed's policies had succeeded in creating nearly 16 million jobs and pushing the unemployment rate down to 4.8
Yellen told the panel that the Fed is close to achieving the two goals it has been given by Congress — promoting maximum employment and stable inflation.
Federal Reserve Chair Janet Yellen has begun her second day of testimony to Congress. She appears today before the House Financial Services Committee, where she is expected to face tough questioning from Republican lawmakers. She spoke to a Senate committee Tuesday.
She says in her prepared remarks that the Fed expects to move interest rates up at a gradual pace this year as long as the job market and the economy remain solid. She says it is too early to determine the impact President Donald Trump's economic program will have on the economy.