I

106TH CONGRESS

1ST SESSION H. R. 653

To mandate price stability as the primary goal of the monetary policy of

the Board of Governors of the Federal Reserve System and the Federal

Open Market Committee.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 9, 1999

Mr. SAXTON introduced the following bill; which was referred to the

Committee on Banking and Financial Services

A BILL

To mandate price stability as the primary goal of the monetary policy of the Board of Governors of the Federal

Reserve System and the Federal Open Market Committee.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Price Stability Act of

5 1999’’.

6 SEC. 2. CONGRESSIONAL FINDINGS.

7 The Congress hereby finds the following:
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1 (1) Price stability provides the essential founda2 tion for sustainable long-run economic and employ3 ment growth.

4 (2) Price stability enables the price system (the

5 information or signaling mechanism of market

6 economies) to function most effectively by directing

7 resources to their most beneficial use.

8 (3) Price stability provides a reliable anchor for

9 the price system so that comparative values can be

10 established and accurately measured.

11 (4) Price stability works to lower interest rates

12 and stabilize financial markets.

13 (5) Price stability serves to promote trans14 parency, accountability, and credibility in monetary

15 policy.

16 (6) A more open and transparent formulation

17 of monetary policy by the Board of Governors of the

18 Federal Reserve System is, in turn, an essential in19 gredient for pursuing and maintaining price stabil20 ity.

21 SEC. 3. PRICE STABILITY AS OVERRIDING GOAL OF MONE22 TARY POLICY.

23 (a) DECLARATION OF POLICY.—

24 (1) IN GENERAL.—Notwithstanding any other

25 provision of law, the primary and overriding goal of
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1 the Board of Governors of the Federal Reserve Sys2 tem (hereafter in this section referred to as the

3 ‘‘Board’’) and the Federal Open Market Committee

4 (hereafter in this section referred to as the ‘‘Com5 mittee’’) with regard to monetary policy shall be the

6 achievement of price stability.

7 (2) PREEMINENCE OVER OTHER GOALS.—Para8 graph (1) shall not be construed as altering or af9 fecting any other goal of monetary policy established

10 under Federal law or by the Board except to the ex11 tent any such goal conflicts with, or is otherwise in12 consistent with, the goal of achieving price stability.

13 (3) TEMPORARY SUSPENSION IN EVENT OF WAR

14 OR ECONOMIC EMERGENCY.—The Board and the

15 Committee may suspend the applicability of para16 graph (1) for a period not to exceed 90 days if the

17 Committee, by a unanimous vote, and the President

18 jointly determine that such suspension is necessary

19 and appropriate and in the public interest due to

20 war or an economic emergency.

21 (b) NUMERICAL DEFINITION OF PRICE STABILITY

22 GOAL REQUIRED.—

23 (1) IN GENERAL.—The Board and the Commit24 tee shall establish an explicit numerical definition of

25 the goal of price stability.
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1 (2) CRITERIA.—The Board and the Committee

2 shall—

3 (A) use a broad measure or index of gen4 eral inflation in the form of inflation targets

5 that is readily available and accessible to the

6 public as the basis for the numerical definition

7 under paragraph (1); and

8 (B) disclose any adjustment to any such

9 index or any explicit growth band utilized by

10 the Board and the Committee in connection

11 with any such index.

12 (c) TIMEFRAME.—The Board and the Committee

13 shall specify the appropriate timeframe for achieving price

14 stability.

15 (d) FALL-BACK OPTIONS.—The Board shall deter16 mine in advance what action the Board will take if the

17 goal of fully achieving price stability is not met within the

18 timeframe established by the Board and the Committee

19 under subsection (c).

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