Dual mandate

The Federal Reserve's "dual mandate" refers to the goals Congress set in the Federal Reserve Act, as amended in 1977: promote maximum employment and stable prices. The statute also mentions "moderate long-term interest rates," which is why some describe a triple mandate, though that is generally seen as following from the first two.

The Fed has interpreted stable prices as an average inflation rate of 2 percent, measured by the PCE price index, a target adopted formally in 2012. It does not set a numeric target for employment, since the level consistent with stable prices changes, and instead evaluates a range of labor-market indicators, including the unemployment rate.

The two goals can conflict: raising interest rates to fight inflation tends to reduce employment, and cutting them to boost jobs can raise inflation. Some economists, including many conservatives, argue that the Fed should focus on price stability alone, as the European Central Bank's primary objective does, because monetary policy cannot permanently raise employment. Others defend the dual approach. Debate also concerns whether the Fed should consider issues like climate or inequality, which critics say go beyond its mandate. See monetary policy.