Powell rebuts a GOP congressman who suggested the Fed drop its mission to boost employment during recessions

• Rep. French Hill suggested the Fed shift its focus away from the jobs market and just to inflation.
• That would remove the maximum-employment goal that's been part of the Fed's dual mandate since 1977.

Federal Reserve Chair Jerome Powell shot down a proposal made by a GOP representative on Wednesday to end the central bank's maximum-employment target.

During Powell's regularly-scheduled testimony to the House Financial Services Committee, Rep. French Hill of Arkansas' 2nd congressional district suggested a complete revamp of the Fed's dual mandate. Instead of pursuing price stability and maximum employment, Hill proposed the Fed nix its employment goal and focus solely on easing inflation.

"Considering the fiscal policy stimulus and the monetary policy we've had in the past couple of years, we really have to focus on price stability ... I'm proposing that we go back to price stability," he said, adding the central banks of Canada, Australia, New Zealand, and the UK already follow a single mandate.

Though Powell didn't explicitly refuse the idea, he offered a few reasons why it wouldn't aid the country's inflation fight. For one, only Congress has the authority to change the Federal Reserve Act and, in turn, adjust the Fed's mandate. The dual mandate has been in place since the act was amended in 1977, and with Congress historically split, it's unlikely such an adjustment would win required support.

Cutting out half of the dual mandate would also have less of an effect than Hill might hope. Most central banks either have a sole inflation mandate or a dual mandate similar to the Fed's, yet the way they go about policy is similar, Powell said. Since the labor market plays such a critical role in the economy, it always factors into inflation, whether it's in a central bank mandate or not.

"You wouldn't actually see any difference in their reaction function, because they do have to look at resource utilization, which is employment, in order to determine policy," Powell told the committee. "You wind up with very similar answers."

Hill's office told Insider the representative is working with colleagues to introduce his proposal for the Fed's mandate soon.

With inflation trending at four-decade highs and the Fed on the verge of removing its pandemic-era monetary support, lawmakers repeatedly questioned the Fed's efforts to cool price growth. Powell revealed he is "inclined" to support a 0.25 percentage-point increase to the Fed's benchmark interest rate at the Fed's March 16 meeting. Higher interest rates serve as the central bank's best tool for fighting inflation, and the widely-expected hike represents a major step in that effort.

Yet major reports on February inflation and hiring are scheduled for release before the Fed's decision. Should hiring unexpectedly reverse course, the central bank could be forced to rethink how it's balancing both ends of its dual mandate.