Vote Smart's Synopsis:

Vote to pass a bill that establishes a Directive Policy Rule to determine interest rates and amends audit regulations for the Federal Reserve.

Highlights:

• Requires the Chairman of the Federal Open Market Committee (FOMC) to submit a Directive Policy Rule to the appropriate congressional committees and the Government Accountability Office after the end of a FOMC meeting, including a statement identifying the FOMC members voting in favor (Sec. 2).

• Requires the Directive Policy Rule to satisfy certain criteria including, but not limited to, the following requirements (Sec. 2):
• The rule must identify the “Policy Instrument” that the rule is targeting;
• The rule must include a systematic quantitative function that models the relationship between “Intermediate Policy Inputs”;
• The rule must include a calculation that mathematically describes the expected annual inflation rate over a 5-year period; and
• The rule must describe the FOMC strategy for the systematic quantitative adjustment of the “Policy Instrument” target to respond to a change in the “Intermediate Policy Inputs”.

• Defines “Policy Instrument” as the following: (Sec. 2) 
• The nominal federal funds rate;
• The rate of interest paid on nonborrowed reserves; or 
• The discount window primary credit interest rate most recently published on the Federal Reserve Statistical Release on selected interest rates. 

• Defines “Intermediate Policy Inputs” as any variable determined by the FOMC as a necessary input to guide open-market operations (Sec. 2).

• Requires the Comptroller General to complete an audit of the Federal Reserve System upon request of the appropriate congressional committees when the FOMC or the Directive Policy Rule is not in compliance with the provisions of this bill (Sec. 2).

• Requires the Chairman of the Board of Governors of the Federal Reserve System to testify in front of the appropriate congressional committees if the FOMC or the Directive Policy Rule is not in compliance with the provisions of this bill (Sec. 2).

Full Bill Text

Full Bill Text