The Federal Reserve System and Price Stabilization

Report Outline
Purposes of Price Stabilization Program
Proposed Means of Price Stabilization
Arguments Supporting and Opposing the Strong Bill
Differing Interpretations of Recent Financial History
Proposed Research and Publicity Programs
Relations with Foreign Central Banks
Practical Consequences of Proposed Legislation

The problem of price stabilization, and the part that may be played in its solution by governmental agencies, is again under consideration by the Banking and Currency Committee of the House of Representatives. Hearings on the new Strong stabilization bill, begun in March, will be resumed late in April. The general purpose of this bill is to place upon the Federal Reserve system responsibility for maintaining stability of the general price level, that is, of an average of such prices as may be deemed to be representative of the purchasing power of the dollar.

The Strong bill, in its present form, is rather vague as to the specific nature of the obligation it proposes to lay upon the Federal Reserve system. Its vagueness is the result of attempts to work the bill into such form as to make it acceptable to individuals holding widely differing views as to what is desirable and practicable. The chief provisions of the bill may be summarized as follows:1

1. The Federal Reserve System (which is defined so as to include the Federal Reserve Board, the Federal Reserve banks and all committees, commissions, agents, and others under their direction, supervision or control) is to make stabilization of prices and of business conditions the primary objective of its credit policy.