Commentary Type

The Federal Reserve’s Impact on Main Street, Retirees, and Savings

Karen Dynan (PIIE)


Mr. Chairman, Ranking Member Moore, and Members of the Subcommittee:

Thank you for the opportunity to testify on the important topic of how the Federal Reserve's policies affect Main Street, retirees, and savers. In my testimony today, I would like to make five principal points:

  1. Accommodative monetary policy since the Great Recession has produced a strong (albeit gradual) economic recovery in the United States—and a stronger recovery than would have occurred without accommodative monetary policy.
  2. While the employment effects of accommodative monetary policy have differed across people, everyone has benefited from more job growth in the country and the greater increase in output that resulted.
  3. The effects of accommodative monetary policy on savers and retirees have differed across people just as the effects of monetary policy on employment have differed across people. The lower interest rates associated with accommodative monetary policy have hurt some savers by reducing their interest income but have helped some savers by boosting prices of assets like stocks and houses.
  4. The Federal Reserve should be accountable to the Congress for its actions, but some of the provisions in the CHOICE Act would materially impair the Federal Reserve's ability to support a strong economy and low and stable inflation.
  5. Achieving financial security in retirement is an important challenge for many Americans, and various aspects of federal policy apart from monetary policy can and should be used to enhance financial security.

Let me now elaborate on these five points.

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