Jai Kedia
Congress requires that the Federal Reserve submit a Monetary Policy Report semiannually. Along with the report, the Fed chair testifies on the state of monetary policy before the House Financial Services and Senate Banking Committees. These practices date back to 1975, when Congress began requiring the Fed to announce its targets for money growth in advance and report back on its progress. The Humphrey-Hawkins Act formalized the arrangement in 1978, and today Section 2B of the Federal Reserve Act requires a written report on “the conduct of monetary policy and economic developments and prospects for the future.” Presumably, the point of these rules was for Americans, through their elected representatives, to maintain some oversight over the Fed and check its progress towards good monetary stewardship.
Aside from the chair’s testimony, the monetary policy report no longer serves that purpose and is borderline useless. As it stands today, the report is mostly a summary of information already in the public domain. Its sections on inflation, employment, and output restate figures from the Bureau of Labor Statistics and the Bureau of Economic Analysis. Its balance sheet tables come from the Fed’s own weekly H.4.1 releases, and its economic projections are reprinted from a Federal Open Market Committee (FOMC) meeting held weeks earlier. Members of Congress preparing for the Chair’s hearings learn little from it that isn’t already available elsewhere.
The good news is that the timing is right to seriously reform the report. In June, Chairman Warsh launched five task forces to review the Fed’s core functions, including one on communications that is examining forward guidance and the Summary of Economic Projections (SEP). (I have previously offered a reform roadmap for all five.) However, the Monetary Policy Report has gone largely unnoticed in the broader discussion, and it belongs on the communications task force’s agenda.
The task force can recommend improvements (see below) on its own, and the Fed can adopt them without waiting on legislation. Still, Congress should codify improvements to the report so that they outlast any one Fed administration.
Take Monetary Policy Rules Seriously
For several years, the report has included a box comparing the federal funds rate (FFR) with the rates that simple monetary policy rules would prescribe. These rules link the policy rate to a handful of indicators, such as inflation and unemployment, and they give outsiders a benchmark for judging Fed decisions. But the practice is voluntary, and when policy departs from the rules, the Fed offers only generic caveats about their limits, noting for instance that strict adherence to any single rule is “undesirable, at present.” (Sometimes they even leave the rule comparison out of the report.)
Congress should require the Fed to publish the prescriptions of at least two policy rules in every report. The Fed can choose which rules to publish, but they should be standard in the academic or policy literature. If it changes the reported rules—that is, the weights placed on the respective ingredients or the ingredients themselves—between reports, it should have to explain why. The Fed should also compare the FFR with those rules and, where they diverge, explain why departing from the rule(s) was the appropriate policy choice.
The July report offers a clear example of why this requirement matters. The Fed acknowledged that the rules it tracks called for a policy rate slightly above the Fed’s target range but gave no specific reason for the gap. Later that month, three FOMC members dissented in favor of a hike, and in September the committee raised the target range to 3.75 to 4 percent. The required explanation in July would have put the Fed on record about why it was holding steady while its own benchmarks pointed to a higher rate. Without this kind of explanation, it is virtually impossible to hold the Fed accountable for its target rate decisions.
Report Progress on Shrinking the Balance Sheet
The Fed already issues a separate balance sheet report, and the monetary policy report’s balance sheet section merely summarizes figures the Fed already publishes every week. Instead, the Fed should use the monetary policy report to detail what steps it has taken to shrink its balance sheet since the previous report.
Ideally, Congress would set a benchmark, such as reducing the Fed’s total assets to 10 percent or less of US commercial banking assets—roughly the ratio the Fed maintained before the 2008 financial crisis. Today that ratio is about 26 percent. The Fed would then report on the progress it has made toward that goal since the previous report or, if it has made none, explain why not.
The Fed has stopped shrinking its balance sheet since December 1, 2025, and has been buying Treasury bills to keep bank reserves at what it considers an ample level. According to the July report, total assets rose by about $150 billion after early January to $6.7 trillion. The Fed has not offered clear explanations for these purchases, and Congress should demand the Fed defend that growth in writing.
Explain the Forecast Misses
The report also reprints the quarterly compilation of the FOMC’s projections for growth, unemployment, inflation, and the policy rate, formally known as the Summary of Economic Projections (SEP). The projections in the July report came from the June FOMC meeting and had already been released three weeks prior.
A more useful approach would require the Fed to chart its SEP projections against the realized values of those indicators after the previous report. Where the two diverge significantly, the Fed should explain which economic forces produced the gap. Congress would then get a regular, written account of why the data strayed from the Fed’s expectations.
Historically, the Fed’s forecast errors have been large. In December 2025, the median FOMC participant projected core inflation of 2.5 percent for 2026 and a policy rate of about 3.4 percent by year-end, which implied further rate cuts. Instead, core inflation ran at 3.3 percent over the 12 months through July, and the Fed is now raising its target range. Some of that miss likely reflects the energy shock that followed the outbreak of the Middle East conflict, but Americans deserve the Fed’s explanation in writing.
Fix It or Scrap It
As it stands, the Monetary Policy Report gives policymakers little they could not find elsewhere. The changes suggested above would help turn the report into a more useful document, one that makes the Fed explain its choices and defend its record. As a result, the public and their representatives could better hold the Fed accountable.
The communications task force can recommend these changes directly to Chair Warsh, but Congress must codify them and make them permanent. If neither happens, Congress should just repeal the reporting requirement and spare the Fed the staff time and resources the report consumes. It can keep the chair’s semiannual hearings, which, if done correctly, remain its best opportunity to question the Fed directly.
