WASHINGTON -- Sen. Connie Mack, R-Fla., said Wednesday that he will hold hearings next year in an effort to refocus the Federal Reserve's management of monetary policy.
At a hearing before the House-Senate Joint Economic Committee, Sen. Mack told Fed Chairman Alan Greenspan that he wants the central bank to focus on inflation, rather than on lowering unemployment.
"We may change the way monetary policy is implemented," said Sen. Mack, who is expected to chair the committee next year. "The Fed should focus solely on the cost of living as a target for monetary policy."
Mr. Greenspan said that he generally agreed with Sen. Mack's plan, but emphasized that he wasn't speaking for the rest of the Fed board.
"I over the years have been a very strong supporter of what is outlined in your suggestion," Mr. Greenspan said.
However, Mr. Greenspan parted company with Sen. Mack on the lawmaker's suggestion that the Fed should try to keep inflation below 2%.
"A more general requirement for the central bank" would be more prudent, Mr. Greenspan said. Writing a specific inflation cap into a statute would "create an unnecessary degree of rigidity," he said.
However, restricting the Fed's role only to inflation could be risky, said Karen Shaw, president of ISD/Shaw Inc. "Economic policy is multidimensional," Ms. Shaw said. "A one-dimensional monetary policy strikes me as possibly dangerous."