Federal Reserve Chairwoman Janet Yellen on Wednesday reiterated her opposition to legislation that would force the Fed to follow a mathematical rule for setting interest rates.

Testifying before the House Financial Services Committee, Ms. Yellen conceded the economy is "in many ways close to normal," but she said conditions still don't warrant a rules-based approach to setting policy.

"I believe, and I think most of my colleagues would agree, that we shouldn't mechanically follow that rule or any other rule but that we need to take into account how the economy is performing," Ms. Yellen told the committee.

The House in November passed legislation that would require the Fed to abide by mathematical a rule when setting rates. The bill also would mandate new audits of the central bank and restrict its emergency-lending powers. Supporters of the legislation say it would make monetary policy more predictable and open the central bank to more outside scrutiny.

In a November letter to House leaders, Ms. Yellen warned the bill "would severely impair the Federal Reserve's ability to carry out its congressional mandate and would be a grave mistake, detrimental to the economy and the American people."

Rep. Jeb Hensarling (R., Texas), the panel's chairman, read a separate letter Wednesday signed by several economists, including Nobel Prize winners Lars Peter Hansen, Robert Lucas and Edward Prescott, supporting the legislation and arguing that a rules-based approach would be appropriate and wouldn't threaten the Fed's independence.

Of Ms. Yellen's letter, Mr. Hensarling said: "I would just caution you when you use such apocalyptic and hyperbolic language whether or not this undercuts your ability as Fed chair."

Write to Kate Davidson at kate.davidson@wsj.com

 

(END) Dow Jones Newswires

February 10, 2016 20:25 ET (01:25 GMT)

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