WASHINGTON (Reuters) - The head of a new congressional panel gearing up to strengthen Capitol Hill's oversight of the Federal Reserve plans a broad review of how the U.S. central bank makes its interest rate decisions, including whether controlling inflation should be prioritized over safeguarding employment.

"A substantial number of my Financial Services Committee colleagues and the chairman want to discuss that issue," Representative Frank Lucas, an Oklahoma Republican, told Reuters in an interview on Monday ahead of next week's first hearing of the Monetary Policy, Treasury Market Resilience, and Economic Prosperity Task Force. "Is there really a dual mandate? And how does that affect the primary mandate of price stability?"

The Fed's dual mandate - to foster price stability and maximum employment - was imposed by Congress in 1978, and right now it is close to both goals: The unemployment rate is 4% and inflation has eased to 2.6% relative to a 2% target, a far better outcome than many feared.

But the experience following the COVID-19 pandemic, with inflation surging to 40-year highs and the Fed scrambling to beat it with rapid rate hikes, has left scars.

Lucas, a three-decade congressional veteran, is keen to explore whether the Fed's approach was flawed. Across a series of hearings in coming months, he will also look at longstanding issues like whether the Fed should make more use of monetary policy rules in its decisions, perhaps not to the full exclusion of its own discretion but as a way to give the public more certainty about the direction of policy.

"If your primary focus is price stability, and if you want the forces of the economy to be able to make decisions, then a more rules-focused process provides certainty to that," Lucas said.

Lucas acknowledged the difficulty of amending the Federal Reserve Act given narrow Republican majorities in the House and Senate, and the nearly 50-year legacy of the dual mandate, but he expects his process potentially to lead to recommended legislation, a series of reports, or recommendations to the Fed.

That is timely, he said, given the Fed is currently conducting its own review of an operating framework that in 2020 intensified its focus on joblessness - and which some argue slowed its response to price pressures that began building in 2021.

"These issues are relevant right now," he said. Along with monetary policy, the panel - composed of eight Republicans and six Democrats - will look at issues around the functioning of the U.S. Treasury market.