Federal Reserve Chair Janet Yellen on Wednesday resisted calls for more congressional oversight and intervention into the U.S. central bank, as members of a House of Representatives panel criticized her and other policymakers for failing to be more accountable.
One Republican lawmaker also continued his attack on the Fed's response to a 2012 information leak, saying Yellen and the central bank had failed to properly respond.
In her semiannual testimony to Congress, Yellen detailed the Fed's flow of information to financial markets as well as its press conference and audit schedules as evidence that the central bank practiced a high level of transparency.
Yellen pushed back against lawmakers' calls to follow a single monetary policy rule rather than use its discretion.
"I think we need a systematic policy. But I would strongly resist agreeing to follow any rule where the stance of monetary policy depends on only the current readings of two economic variables, which is what your reference rule relies on," Yellen said.
Representative Sean Duffy, a Wisconsin Republican, pulled no punches during Yellen's testimony, accusing the Fed of deliberately sweeping under the rug an investigation into the 2012 leak of market-sensitive information to a private financial newsletter.
Texas congressman Jeb Hensarling, the Republican chairman of the House Financial Services Committee, demanded the central bank be more predictable and implored it to cooperate with the investigation.
"The Fed is not above the law," Hensarling said during his opening remarks.
He then turned up the heat on Yellen, cutting her off several times and trying to push her to admit that the 2010 Dodd-Frank financial reform law still allowed some banks to be too-big-to-fail.
Yellen stood firm, saying the law has limited the central bank's emergency lending powers.
Hensarling repeated his view that the Fed should follow a predictable monetary policy rule rather than exercise wide discretion, and cited his concerns over the central bank's wide regulatory powers obtained after Dodd-Frank.
His opening salvo followed testimony by Yellen, who said the Fed remains on track to raise interest rates this year, with labor markets expected to steadily improve and turmoil abroad unlikely to throw the U.S. economy off track.
Financial markets did not react to Yellen's remarks.
"It was basically an extension of her speech on Friday," said Tom Porcelli, chief U.S. economist at RBC Capital Markets, referring to Yellen's remarks in Cleveland, when she said the central bank expects to raise rates sometime later this year.
Yellen's testimony also largely tracked the Fed policy-setting committee's most recent statement in June.
The transparency part of Yellen's testimony was no doubt an effort to counter tough questions from members of the House panel. Yellen sparred with Hensarling and others when she last testified in February.
In May, Hensarling subpoenaed Fed documents and communications related to the 2012 leak.
He said the central bank failed to comply with document requests from the panel in connection with the leak.
Yellen said the Fed had declined to send the information because a separate Justice Department probe is ongoing.
"Reforms are needed," U.S. Representative Bill Huizenga, a Michigan Republican, told Yellen during her testimony, repeating Hensarling's call for the Fed to follow a monetary policy rule.
"The Fed must be accountable to the people's representatives."
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