Pablo Martinez Monsivais, Associated Press
Federal Reserve Chair Janet Yellen testifies on Capitol Hill in Washington, Wednesday, July 16, 2014, before the House Financial Services Committee hearing entitled: "Monetary Policy and the State of the Economy.
WASHINGTON — Federal Reserve Chair Janet Yellen says it would be a serious mistake for Congress to require the nation's central bank to adopt a formal policy rule to guide its decisions on setting interest rates.
Yellen faced a barrage of questions from Republican lawmakers about legislation that they are supporting to make the Fed more accountable and make its policy decisions more transparent. One of the requirements would have the Fed adopt a policy rule that would govern future decisions and would require the General Accountability Office to audit the rule.
Yellen says that requiring the Fed to follow a mathematical formula would be a "grave mistake." She says the economy would be in worse shape today if the Fed had set monetary policy by formula in recent years.