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.

June 19, 2003

Mr. SAXTON introduced the following bill; which was referred to the Committee on Financial Services

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.

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

SECTION 1. SHORT TITLE.

This Act may be cited as the `Price Stability Act of 2003'.

SEC. 2. CONGRESSIONAL FINDINGS.

The Congress hereby finds the following:

(1) Price stability provides the essential foundation for sustainable long-run economic and employment 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 transparency, 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 ingredient for pursuing and maintaining price stability.

SEC. 3. PRICE STABILITY AS OVERRIDING GOAL OF MONETARY 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 System (hereafter in this section referred to as the `Board') and the Federal Open Market Committee (hereafter in this section referred to as the `Committee') with regard to monetary policy shall be the achievement of price stability.

(2) PREEMINENCE OVER OTHER GOALS- Paragraph (1) shall not be construed as altering or affecting any other goal of monetary policy established under Federal law or by the Board except to the extent any such goal conflicts with, or is otherwise inconsistent 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 paragraph (1) for a period not to exceed 90 days if the Committee, by a majority 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) DEFINITION OF PRICE STABILITY GOAL REQUIRED-

(1) IN GENERAL- The Board and the Committee shall establish a definition of the goal of price stability.

(2) CRITERIA- The Board and the Committee shall implement the definition of price stability established pursuant to paragraph (1) through inflation targets.

(c) TIMEFRAME- The Board and the Committee shall specify an appropriate timeframe for achieving price stability.

(d) FALL-BACK OPTIONS- The Board shall determine 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).

END