Fed has lost credibility: Senator Toomey

Republican Sen. Pat Toomey said Thursday it's "unbelievable" that interest rates remain so low and it's time to end the Federal Reserve's "subjective" moving of the goal post.

"The Fed no longer has credibility, and you can see that. The divergence between the futures markets and the Fed's own projections about what they're going to do about interest rates—this is a huge problem," he told CNBC's "Squawk Box."

The Fed is widely expected to begin raising its benchmark rate by early next year. It has kept its fed funds rate near zero since December 2008.

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Toomey is a member of the Senate banking committee, which will hear testimony from Fed Chair Janet Yellen on Thursday. He has called on the central bank to adopt a rule that would lay out how it will set monetary policy. Under such a rule, the Fed would have to explain itself to Congress were it to deviate from its plan.

"I've never been wild about the idea of giving Congress control over monetary policy, but after seeing what this Fed has been doing for these many years now, I'm not so sure it would be any worse," the Pennsylvania Republican said.

"In any case, I'm not suggesting that Congress get up every morning and set the fed funds rate, but why not have the Fed adopt a rule?"

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The Fed has a mandate from Congress, spelled out in a 1977 amendment to the Federal Reserve Act, to keep prices stable, achieve maximum employment and moderate long-term interest rates. The Federal Reserve was established as an independent body in part to prevent short-term political concerns from influencing broader monetary policy.

Correction: This version corrected a headline to show that Toomey said the Fed has lost credibility. It also corrected a quote from Toomey. He said: "... why NOT have the Fed adopt a rule?"