ROBERT SIEGEL, HOST:
There were a lot of tough questions for Janet Yellen on Capitol Hill today. The Federal Reserve chair was at the House Financial Services Committee to give lawmakers an update on the economy and on Fed policy. But as NPR's John Ydstie reports, the toughest questions weren't about economic policy, they were about who is in control, Congress or the Fed?
JOHN YDSTIE, BYLINE: The Federal Reserve was created by Congress, but it was designed to be an independent agency that could make monetary policy without congressional interference. At times, that's produced some tension between the fed's congressional overseers and its chairman. And in recent months, the tensions have risen sharply. They were on full display today as Janet Yellen faced off with Republicans on the House Financial Services Committee. The lawmakers have expressed growing frustration over the Fed's failure to respond to a subpoena for documents related to a leak of confidential information from a Fed meeting in 2012. Committee Chairman Jeb Hensarling of Texas raised the issue in his opening statement.
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JEB HENSARLING: The Fed's refusal to cooperate in a congressional investigation threatens both its reputation and its credibility. The Fed is not above the law. This is a very serious matter and it must be resolved.
YDSTIE: Hensarling's remarks turned out to be restrained compared to the questioning by Sean Duffy, a Republican from Wisconsin.
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SEAN DUFFY: Give me the legal authority that you have not to comply with the subpoena.
JANET YELLEN: We have indicated that we fully intend to cooperate with you to provide the documents. This matter is the subject of an open criminal investigation by the board's inspector general and by the Department of Justice. It will compromise...
DUFFY: No, no.
YELLEN: ...Likely compromise their investigation.
DUFFY: You are the chair - we have the right to these documents. You have the duty to provide them to us. We are entitled to do oversight. You're required to give us the documents. I hope that you'll reconsider your denial.
YDSTIE: Not surprisingly, the conflict was not resolved during this hearing. There were also some sparks as Republicans urged Yellen to tie rate hikes more directly to economic indicators like the level of inflation and GDP growth. Yellen said the economy was too complex and if Fed policy were constrained in that way, it could be damaging. Despite these fireworks, there was some time devoted to the economy's current health. Yellen said once again that sluggish growth in the first half of the year was due to temporary factors and that the Fed expects moderate growth and further improvement in the labor market in the second half of this year. And she said the Fed is likely to begin raising rates soon.
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YELLEN: If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target.
YDSTIE: Democrat Carolyn Maloney of New York asked Yellen if it's possible further economic turmoil in Greece or other parts of the world might affect the Fed's rate hike schedule. Yellen said Fed policymakers are factoring-in the global situation.
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YELLEN: As we've said all along, we have no judgment at this point about the appropriate date to raise the federal funds rate. Our judgment about that will depend on unfolding economic developments.
YDSTIE: A number of Republicans suggested that after more than six years of holding short-term interest rates near zero, it was past time for the Fed to push them up. But Democrats argued that with inflation remaining low and millions still out of work, the Fed should remain patient. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
