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 mone-
tary policy of the Board of Governors of the Federal
Reserve System and the Federal Open Market Commit-
tee.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Price Stability Act of
1999’’.
SEC. 2. CONGRESSIONAL FINDINGS.
The Congress hereby finds the following:
(1) Price stability provides the essential founda-
tion for sustainable long-run economic and employ-
ment growth.
(2) Price stability enables the price system (the
information or signaling mechanism of market
economies) to function most effectively by directing
resources to their most beneficial use.
(3) Price stability provides a reliable anchor for
the price system so that comparative values can be
established and accurately measured.
(4) Price stability works to lower interest rates
and stabilize financial markets.
(5) Price stability serves to promote trans-
parency, accountability, and credibility in monetary
policy.
(6) A more open and transparent formulation
of monetary policy by the Board of Governors of the
Federal Reserve System is, in turn, an essential in-
gredient for pursuing and maintaining price stabil-
ity.
SEC. 3. PRICE STABILITY AS OVERRIDING GOAL OF MONE-
TARY POLICY.
(a) DECLARATION OF POLICY.—
(1) IN GENERAL.—Notwithstanding any other
provision of law, the primary and overriding goal of
the Board of Governors of the Federal Reserve Sys-
tem (hereafter in this section referred to as the
‘‘Board’’) and the Federal Open Market Committee
(hereafter in this section referred to as the ‘‘Com-
mittee’’) with regard to monetary policy shall be the
achievement of price stability.
(2) PREEMINENCE OVER OTHER GOALS.—Para-
graph (1) shall not be construed as altering or af-
fecting any other goal of monetary policy established
under Federal law or by the Board except to the ex-
tent any such goal conflicts with, or is otherwise in-
consistent with, the goal of achieving price stability.
(3) TEMPORARY SUSPENSION IN EVENT OF WAR
OR
ECONOMIC
EMERGENCY.—The Board and the
Committee may suspend the applicability of para-
graph (1) for a period not to exceed 90 days if the
Committee, by a unanimous vote, and the President
jointly determine that such suspension is necessary
and appropriate and in the public interest due to
war or an economic emergency.
(b) NUMERICAL DEFINITION OF PRICE STABILITY
GOAL REQUIRED.—
(1) IN GENERAL.—The Board and the Commit-
tee shall establish an explicit numerical definition of
the goal of price stability.
(2) CRITERIA.—The Board and the Committee
shall—
(A) use a broad measure or index of gen-
eral inflation in the form of inflation targets
that is readily available and accessible to the
public as the basis for the numerical definition
under paragraph (1); and
(B) disclose any adjustment to any such
index or any explicit growth band utilized by
the Board and the Committee in connection
with any such index.
(c) TIMEFRAME.—The Board and the Committee
shall specify the appropriate timeframe for achieving price
stability.
(d) FALL-BACK OPTIONS.—The Board shall deter-
mine in advance what action the Board will take if the
goal of fully achieving price stability is not met within the
timeframe established by the Board and the Committee
under subsection (c).
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