Binding the Fed Won't Help the Economy

When Federal Reserve Chair Janet Yellen delivered her semiannual testimony to Congress this month, lawmakers once again expressed concern that the central bank was insufficiently transparent and may be pursing an over-expansionary monetary policy that could lead to high inflation.

This was but the latest round of questions about the Fed's considerable discretion to take actions such as adjusting the federal funds rate without interference from Congress or the President. Late last year, a bill passed the House that would require the central bank to abide by a so-called policy-instrument rule and set its policy instrument based on certain available data, including inflation, gross domestic product and unemployment.