Current law gives the Federal Reserve’s Board of Governors and its Federal Open Market Committee (FOMC) broad authority to establish and conduct monetary policy. Twice each year, the Chair of the Federal Reserve is required to present Congressional testimony and to report to the Congress concerning the efforts, activities, objectives, and plans related to monetary policy.
H.R. 4270 would require the FOMC to establish and describe an annual strategy for monetary policy that would include a mathematical description of the way that the committee would adjust the instruments of monetary policy, including an identified primary instrument, in response to changes in economic indicators. The bill would also require the Federal Reserve’s testimony and reports to describe at least one additional reference rule, or alternative mathematical equation that would govern the conduct of monetary policy, and identify whether and how actual monetary policy has deviated from that rule.
The bill would directly affect revenues through the operations of the Federal Reserve System, which remits its net earnings to the Treasury; those remittances are classified as revenues in the federal budget. CBO estimates that enacting H.R. 4270 would increase costs of the Federal Reserve starting in 2019 and thus decrease federal revenues by $8 million over the 2018-2027 period. That estimate of revenue reductions reflects higher costs of the Federal Reserve System associated with preparing and describing the monetary policy strategy and rules required by the bill.
The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement requirements for legislation affecting direct spending or revenues. CBO estimates that enacting H.R. 4270 would not affect direct spending.
CBO estimates that enacting H.R. 4270 would not affect net direct spending or increase on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2028.
H.R. 4270 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would impose no costs on state, local, or tribal governments.