Corker Calls for Dropping Fed Mandate on Jobs - Wall Street Journal, Nov 16, 2010.
Sen. Bob Corker (R., Tenn.) called Tuesday for a narrowing of the Federal Reserve’s focus to price stability, the latest attempt by a Republican to alter the central bank’s mandate.
A day after holding a long meeting with Fed Chairman Ben Bernanke, Corker said the central bank’s “overly broad dual mandate” should be changed so that full employment will no longer be its responsibility.
“The Federal Reserve is not seeking a change to its statutory mandate. The dual mandate is appropriate,” said Michelle Smith, spokeswoman at the Fed.
The Fed’s latest attempt to spur growth and jobs by buying $600 billion in government debt is coming under increasing fire from Republican politicians and economists who are worried it could lead inflation to move sharply higher in the future.
A top House Republican, Mike Pence of Indiana, said Monday that he plans to introduce legislation that would make the Fed’s focus on just fighting inflation. A group of Republican-leaning economists published on open letter in Tuesday’s Wall Street Journal asking Bernanke to drop the bond purchases, saying it could spark inflation and hurt the U.S. dollar.
“As a result of lengthy research and discussion, Corker believes now is the time to direct the mandate of the Fed to focus only on price stability,” the senator said in a statement.
The majority of central banks in large advanced economies have price stability as their only goal. But the Fed was given two objectives by Congress: after the 1930s Great Depression and high unemployment, the Fed was tasked with keeping the economy and jobs growing. Price stability was added following the double-digit inflation seen in the 1970s.
“I am concerned about inflation down the road,” Corker told CNBC. “The time is right for us to bring clarity to the Fed,” he said, adding he believes the current dual mandate can send misleading signs to financial markets.
Senate Minority Leader Mitch McConnell (R., Ky.) said removing the full employment part from the Fed’s mandate would only be “one of the many issues we’ll be thinking about in the coming weeks.”
Corker is a moderate Republican who is scheduled to be up for reelection in 2012. Moderate Republicans faced stiff challenges from the right at recent elections.
He is also a member of the Senate Banking Committee, which is slated to vote for the second time later Tuesday on the appointment of economist and recent Nobel laureate Peter Diamond to the Fed board. The Massachusetts Institute of Technology economist was rebuffed by Senate Republicans just weeks before winning the Nobel. Republicans said at the time that he lacked the appropriate economic policy background.