Republican lawmakers urged Federal Reserve Chairman Ben S. Bernanke to refrain from additional monetary easing to avoid “further harm” to the U.S. economy, saying Americans have reason to be “skeptical” of his plans.
“Although the goal of quantitative easing was, in part, to stabilize the price level against deflationary fears, the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy,” according to a letter to Bernanke signed by Senate Minority Leader Mitch McConnell, House Speaker John Boehner, Senator Jon Kyl and House Majority Leader Eric Cantor.
Senator Charles Schumer, a Democrat from New York, in a statement today called the letter “a heavyhanded attempt to meddle in the Fed’s independent stewardship of monetary policy” and said it should be “ignored by Chairman Bernanke and the Fed’s policy makers.”
Bernanke has said the Fed has more tools available to stimulate the economy as risks to the U.S. recovery rise and unprecedented easing falls short of fulfilling the Fed’s mandate for full employment. The yield on the 10-year Treasury note already fell to a record low this month on concerns global growth is flagging and Europe’s sovereign-debt crisis will intensify.
“We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy,” the lawmakers wrote in the letter dated Sept. 19. “Such steps may erode the already weakened U.S. dollar or promote more borrowing by over-leveraged consumers. To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.”
The Federal Open Market Committee tomorrow will probably announce it has decided to replace short-term Treasuries in its $1.65 trillion portfolio with long-term bonds, according to 71 percent of 42 economists surveyed by Bloomberg News. The move will probably fail to reduce the 9.1 percent unemployment rate, 61 percent of the economists said. Among those, 15 percent predict it will be “somewhat harmful.”
The senators and congressmen asked that a copy of their letter be shared with each member of the committee.
“The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measureable outcomes cannot be demonstrated,” the letter stated.
--Editors: Brendan Murray, Garfield Reynolds
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