A House bill that seeks to bring ‘equity’ and ‘inclusion’ to the Fed is a grave threat to responsible monetary policy. Amid the worst inflation in 40 years, Congress is considering a disastrous change to the Federal Reserve's mandate. Elected officials should be instructing the Fed to focus on price stability. Instead, they're trying to appease the far Left by pushing the Fed into social-justice activism. A bill just passed by the House of Representatives would codify woke politics into the Fed's mission. If it becomes law, the Fed will become even less capable of controlling inflation.

H.R. 2543, the Financial Services Racial Equity, Inclusion, and Economic Justice Act, has a name pleasing to some ears. But it's a grave threat to responsible monetary policy. The bill requires the Fed's Open Market Committee to exercise all [its] duties and functions to eliminate racial disparities in employment, income, and wealth. That some politicians think, at a time when gas is topping $5 a gallon nationwide, it's a good idea to redirect monetary policy away from fighting inflation is mind-boggling.

The bill's sponsor is Representative Maxine Waters (D., Calif.), who has a history of playing politics with the Fed. In 2020, she sent Chairman Jerome Powell a letter urging central bankers to wield their emergency powers in a way that advanced her partisan agenda. In defiance of best practices in last-resort lending, Waters called on Powell to protect existing collective bargaining agreements as well as require eligible businesses to guarantee . . . a $15 minimum wage. Nowhere in its mandate was the Fed authorized to pursue these goals. Now Waters wants to use heavy-handed legislation to yoke the Fed to her narrow conception of social justice.

Nobody denies that racial and economic disparities are worrisome. But it's folly to charge the Fed with prioritizing them over price stability. Incomes, employment, and wealth are lower among minorities whether the economy is booming or not. That means these disparities don't depend on the money supply, which the Fed is charged with managing. Central banks simply don't have the right tools to weed out the structural causes of inequality.

The bill makes it sound like the Fed is a newcomer to the realm of social policy. In fact, the central bank spent much of the past year meddling in areas unrelated to money and banking. Fed officials veered into environmental policy by pressuring banks to demonstrate that their balance sheets weren't overly susceptible to climate risk. Under pressure from the Biden administration, the central bank has also embraced the diversity, equity, and inclusion mantra of the far Left. Recent publications on structural racism in America's economy and restorative housing reparations appear to show that progressive ideology is displacing sound monetary economics at several of the Fed's regional Reserve Banks. While the Fed dabbled in activism and distracted itself with false narratives about transitory inflation, prices climbed ever higher.

Only Congress can put the Fed back on track. Now is the time for elected officials to defend the integrity of the dollar. Yet, inexplicably, they're doubling down on the same failed strategies that created this mess. With prices rising 3.6 percentage points faster than wages, the median American household is effectively taking a $2,400 pay cut this year. This hurts the economically vulnerable most of all – including the very people H.R. 2543 is intended to help.

If Congress succeeds in amending the Fed's mandate to include left-wing objectives, we can kiss a stable dollar goodbye. Running the printing presses and allocating credit to social-justice-adjacent organizations will become required by law. That won't help the underprivileged, but it will result in perpetual price hikes. A generation ago, central bankers crushed inflation by committing to monetary restraint. Now that legacy is vanishing because of our representatives' political ambitions. But they won't be the ones to bear the costs. Ordinary Americans will.

Phillip Magness is the director of research and education at the American Institute for Economic Research. Alexander William Salter is an associate professor of economics in the Rawls College of Business at Texas Tech University, a researcher with TTU's Free Market Institute, and a senior fellow at the Sound Money Project.