Republicans in Congress Turn Up Scrutiny of Fed as Inflation Persists
Amara Omeokwe and Billy House
5 min read
(Bloomberg) -- Congressional Republicans are ramping up scrutiny of the Federal Reserve, just as the central bank confronts stubborn inflation and broader questions about its role as a bank regulator.
The opening act in the new effort will come Tuesday at the first hearing of a freshly formed House task force that will home in on the Fed. It falls the same day President Donald Trump will address Congress amid a barrage of directives expanding his authority over independent government agencies.
“We needed a particular special focus in using the task force route to look at the Federal Reserve system, literally from the charter in 1913 to present,” said Frank Lucas, an Oklahoma Republican who will chair the new panel examining the central bank’s conduct of monetary policy and bank regulation.
The task force launches its work as the Fed wrestles with signs of resurgent inflation, fears the economy is headed toward a period of stagflation and Trump’s threats of new tariffs that could drive up consumer prices. It must navigate the uncertainty with a president who has often lambasted the central bank’s policymaking, though has so far tempered criticisms during his current term.
Trump’s most prominent ally and adviser, tech billionaire Elon Musk, nonetheless has targeted the central bank, charging that it is “absurdly overstaffed,” a characterization Fed Chair Jerome Powell disputes.
Lucas said a key question for the congressional task force will be whether the Fed’s role in the economy and banking regulation has grown too broad. That includes whether its congressionally-assigned dual mandate — to foster both price stability and maximum employment — is appropriate. He added the panel will also consider “issues involved with the supervisory role that really wasn’t envisioned in 1913” when the Fed was created by Congress.
The central bank has kicked off its own five-year review of its monetary policy strategy. Among other things, Fed officials will be grappling with the question of whether they were slow to respond to inflation following the outbreak of Covid-19 because they were overly focused on the employment portion of their mandate.
“I think the Fed’s primary mission — its core mission — should be price stability,” said French Hill, Republican of Arkansas, in an interview last month. Hill is the top GOP member on the House Financial Services Committee, which oversees the Fed. In January, he announced the creation of the new task force under the umbrella of the larger committee.
The group’s launch and the intended probing of the dual mandate likely reflect the political salience of the Fed’s task to manage inflation, said Sarah Binder, a professor of political science at George Washington University. Inflation’s jump above 7% in 2022 severely damaged Democrats’ ability to ultimately retain the White House.
Inflation has since fallen closer to the Fed’s 2% target, which allowed the central bank to reduce rates three times in late 2024, but the downward progress has stalled. That’s prompted Fed officials to signal caution over further cuts. Meanwhile, Trump is pursuing an ambitious economic agenda and promised to lower inflation for Americans.
“Given the preeminent importance of getting inflation and prices down for Trump’s and Republicans’ success, I’m not surprised that Republicans are trying to highlight their concerns about the Fed and the direction given to the Fed under the Federal Reserve Act by Congress,” Binder said. “It speaks to Republicans’ understanding that this is of preeminent importance to their political and policy agendas.”
The task force’s precise aims and focus areas are still being defined, lawmakers said. When asked whether the panel might consider advancing legislation to alter the Fed’s dual mandate, Lucas pointed to the slim majority Republicans hold in the House and the 60-vote threshold for passage of most bills in the Senate.
Instead, Lucas described an effort that is, for now, more exploratory in nature.
“I have an agenda to pull the information together to achieve a consensus on what might or might not be done,” Lucas said.
Juan Vargas of California, the ranking Democrat on the task force, said he was looking forward to working with his GOP colleagues, but called the idea of de-emphasizing the Fed’s employment goal “terribly wrong.”
“For most people in the United States, it’s a job, actually, that’s the most important thing,” Vargas said. “I am concerned that some of my Republican colleagues don’t see it that way.”
Bank Regulation
The Fed’s role as a regulator of the nation’s largest banks may also draw scrutiny — an area where it’s already on the defensive. During hearings last month, Republicans peppered Powell on a range of regulatory issues, including how the central bank determines who has access to its payments system and its work to finalize bank capital rules.
Republicans opposed an initial proposal for those rules led by Fed Governor Michael Barr and effectively pushed him out of his post as the Fed’s vice chair for supervision. Barr last month resigned from the position after speculation that Republicans would remove him from that job.
More pressure is on the way. Trump last month issued an executive order to exert more White House control over independent regulatory agencies, including the Fed — though the order notably carved out an exception for monetary policymaking.
Bill Huizenga, a Michigan Republican and member of the task force, said he thought the Fed sometimes co-mingles its role as a monetary policymaking body and a bank regulator, signaling another potential angle of inquiry for the new group.
