The Economy & the Fed

Maximum Employment and the Dual Mandate

Congress gave the Federal Reserve two goals for monetary policy: maximum employment and stable prices (with moderate long-term interest rates as a result). This is called the dual mandate. Maximum employment is the highest level of employment the economy can sustain without pushing inflation up; the Fed does not set a fixed number for it. When the job market is weak the Fed leans toward lower rates, and when inflation is high it leans toward higher rates, which is why the jobs report and the inflation reports both move interest-rate expectations.

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