House Republicans want to impose greater oversight over the Federal Reserve, moves that the central bank’s top official claims would damage the U.S. economy.

Fed Chairwoman Janet Yellen testified before Congress this week as part of a semiannual appearance with lawmakers. She used part of her time before the House Financial Services Committee to speak out against legislative proposals to expand congressional review of the Fed’s decision-making.

“Efforts to further increase transparency, no matter how well intentioned, must avoid unintended consequences that could undermine the Federal Reserve’s ability to make policy in the long-run best interest of American families and businesses,” Yellen said

One bill would require the Fed to articulate how it sets interest rates and explain why it sometimes deviates from its own rules when doing so. Another plan would establish regular external review of the Fed’s policy-making process.

Yellen insisted the changes might interfere with monetary policy, while Republicans insisted their proposals would improve the management of monetary policy as well as the regulation of the financial industry.

The committee’s chair, Representative Jeb Hensarling of Texas, said the Fed’s approach to monetary policy has been “amorphous, opaque and improvisational.”

“One way our economy could be healthier is for the Federal Reserve to be more predictable in the conduct of monetary policy,” he added.

-Noel Brinkerhoff

To Learn More:

Janet Yellen Warns Congress Against Adding to Fed’s Oversight (by Binyamin Appelbaum, New York Times)

Yellen Stands by Fed Transparency as Lawmakers Turn Up Heat (by Michael Flaherty and Howard Schneider, Globe and Mail)

Federal Reserve Gives Yet another Gift to Big Banks (by Steve Straehley, AllGov)