Update 3: Here’s the letter:
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551
Dear Chairman Bernanke:
We firmly believe that monetary policy decisions by the U.S. Federal Reserve must be free and independent from political pressures. At the same time, the Federal Reserve should be open to receiving input and data from a wide range of sources. This combination preserves confidence in the credibility and effectiveness of decisions made by the Federal Reserve.
It is with that understanding that we write to express our deep concerns over the recent announcement that the Federal Reserve will purchase additional U.S. Treasury bonds, the so-called Quantitative Easing 2 (QE2). While intended to improve the short-term growth of the U.S. economy and help maintain a stable price level, such a measure introduces significant uncertainty regarding the future strength of the dollar and could result both in hard-to-control, long-term inflation and potentially generate artificial asset bubbles that could cause further economic disruptions.
The Federal Reserve’s recent move has also generated increased criticism and action from other central banks and governments. We appreciate that such comments must be examined within the context of which they have been offered. However, any action taken by our nation or foreign nations that impairs U.S. trade relations at a time when we should be fighting global trade protection measures will only further harm the global economy and could delay recovery in the United States.
Perhaps most damaging, we believe that QE2 is giving the impression that the Federal Reserve will keep making new and different attempts to boost the short-term prospects for the economy. Our long-term growth depends on restoring confidence and certainty in our fiscal, regulatory, and trade policies — and not on government’s willingness to engage in additional stimulative measures. When asset prices increase due to anticipated Federal Reserve policy rather than economic fundamentals, it increases the potential for speculative action and erodes confidence in the economic outlook, making it more difficult to generate sustainable growth.
We hope you and the other Board Members will keep these concerns in mind as you review and discuss these issues in the coming months.
Member of Congress
Member of Congress
Update 2: Confirmation from Reuters the letter exists.
From Reuters, a quote from the letter, on QE2:
“introduces significant uncertainty regarding the future strength of the dollar and could result both in hard-to-control, long-term inflation and potentially generate artificial asset bubbles that could cause further economic disruptions”
Update: We’re still looking for the letter mentioned on CNBC. When we have it, we’ll bring it to you.
More to follow…
The comments indicated would make sense, considering Republican dissatisifcation with Federal Reserve Chairman Bernanke’s defence of QE2 to senators today.
Republicans have proposed a bill that would strip the Fed of its mandate to seek full employment. The Fed would be left to focus on inflation and deflation.
Republican leaders of the House of Representatives and Senate have sent a letter to Ben Bernanke and the Federal Reserve on QE2, according to CNBC.
Reportedly, that letter targets the program’s potential debasement of the U.S. dollar.