Congressional Republicans make another attempt to limit the Fed’s power while adopting the course of monetary policy. In their opinion, the steps the regulator takes do not bear fruit, but its role in the economic system is dominant. The U.S. House Financial Service Committee is supposed to consider soon a draft law on the Fed’s actions on condition that monetary policy is changed. Thus, legislators intend one more time to lessen the central bank’s influence.
However, despite such a fuss, experts are sure that there is no chance for Republicans to have luck on their side. While the House of Representatives is likely to adopt the draft, the Senate, which is ruled by Democrats, is unlikely to give its approval. It should be noted that such an action illustrates how Republicans will administer provided that they gain the majority in both Congress and the Senate. In case the bill is passed, the Fed will have to set interest rates in accordance with the strict rule similar to the Taylor rule.
The Taylor rule helps to set and adjust the prudent interest rate which is necessary at a certain period of time. Thus, if the American regulator violates the rule, it will be obliged to give the reasons why. According to Stanford professor John Taylor, the bill gives the Fed enough flexibility in changing policy rate in times of crisis. In his opinion, it will increase the transparency and responsibly of the Fed’s action, thus the draft should arise no doubts at all, he said.
