helps to create a form of " automatic stabilizer " operating in financial markets ; as the economy is buffeted by shocks, market participants anticipate how the central bank is likely to move short - term interest rates in the future, and these expectations are then immediately reflected in movements in long - term interest rates that help to counteract the effects of the shocks. well, i hope by now i've convinced you that the fomc's announcements - - though sometimes criticized as terse or inscrutable - - are in fact the embodiment of nearly every major change in the u. s. monetary policy framework in the last twenty - five years. not bad for a one - page document. having talked at some length about the broad conceptual framework underlying last week's fomc announcement, i'd like to now turn to what it actually said. a key passage of the announcement read as follows : the committee continues to believe that an accommodative stance of monetary policy, coupled with still - robust underlying growth in productivity, is providing important ongoing support to economic activity. however, incoming economic data have tended to confirm that greater uncertainty, in part attributable to heightened geopolitical risks, is currently inhibiting spending, production, and employment. those two sentences succinctly summarize the important crosscurrents that the fomc must take into account in the current environment. on the one hand, the current very low setting of the target funds rate is undoubtedly imparting considerable economic stimulus. moreover, the u. s. economy has proven to be remarkably resilient in recent years, and underlying economic trends such as continued strong productivity growth bode well for economic prospects in the longer run. indeed, the latest productivity data released just last week showed yet another very substantial increase in labor productivity in the third quarter. while some of the recent outsized increases in productivity may prove to be temporary, the recent data do suggest that underlying trend productivity growth remains quite buoyant, and that, in turn, should ultimately show through to stronger incomes for households and an improved profit outlook for businesses. on the other hand, the u. s. economy has been beset by a string of adverse shocks in the last two years, and the fomc last week expressed its concerns that the lingering effects of those shocks and the uncertainty about the economic outlook were factors hindering the economic recovery. as noted in the minutes of several

webpage “ system open market account holdings “. see board of governors of the federal reserve system ( 2014 ), “ federal reserve issues fomc statement on policy normalization principles and plans, ” press release, september 17. see “ federal reserve system audited annual financial statements ” on the board ’ s website. the reports are available on the gao ’ s website. see “ credit and liquidity programs and the balance sheet ” on the board ’ s website. bis central bankers ’ speeches the significant costs of restrictions on the fed ’ s independence as i said at the outset, i believe these proposals under consideration by the congress fail to anticipate the significant costs and risks of subjecting the fed ’ s conduct of monetary policy to political pressure and of limiting the ability of the fed to execute its traditional role of keeping credit flowing to american households and businesses in a financial crisis. let me first address “ audit the fed, ” which would repeal a narrow but critical exemption, adopted by the congress in 1978, to limit gao policy reviews of the fed ’ s conduct of monetary policy. the congress granted this exemption because the costs of involving the gao in monetary policy, including the substantial risk of political interference, far outweigh the potential benefits. it is important to note that gao investigations are not the financial audits that many assume them to be. they extend beyond mere accounting to examine strategy, judgments and dayto - day decisionmaking. indeed, by statute, the gao is charged with making recommendations to congress about the areas they have reviewed. this could put the gao in the position of reviewing the fomc ’ s policy decisions and recommending its own course for monetary policy. with these features in mind, the potential benefits of gao policy audits would be small, even before considering the potential costs. unlike the programs that are typically the subject of gao policy audits, such as procurement decisions that may be brought to light only by the gao ’ s attention, monetary policy decisions occur with all of the world watching. they are announced immediately, described in an fomc statement, often elaborated on in a press conference, and the subject of endless same - day - analysis and debate. with all of this transparency and analysis, very little would be revealed by gao policy audits that would help evaluate the effectiveness of monetary policy. the benefits of frequent gao policy audits would also be low because the effects of monetary policy are felt with a considerable time lag and are often only clear years