Support For The Fed’s Dual-Mandate

Central banks ordinarily serve to promote stable pricing in the economy, however the U.S. Federal reserve is also charged with stimulating maximum sustainable growth. This is referred to as a dual mandate, which many believe should not apply to central banks. The supporters of the dual mandate say that the Fed has performed well; “perhaps even better than single-mandate central banks.” The current monetary policy of the Fed is geared toward improving job growth during the time of low inflation; $85 billion of monthly bond purchases which keep interest rates low to encourage spending.

The dual mandate of the Fed creates considerable difficulties when it comes to implementing monetary policy since it becomes necessary to take other factors into account. The saying “don’t fight the Fed” has held merit for quite some time but only Siths deal in absolutes. Our central bank plans on continuing its current policy until unemployment reaches 6.5% or inflation 2%, but recent developments in the economy may influence the stimulus package to be tapered off sometime soon.

Evan Chang

Source:

The Wall Street Journal

http://blogs.wsj.com/economics/2013/04/13/fed-officials-defend-banks-dual-mandate-policy/

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