Fact Check: The Federal Reserve's Dual Mandate Includes Full Employment and Price Stability
What We Know
The Federal Reserve (Fed) operates under a dual mandate established by Congress, which includes the goals of maximum employment and stable prices. This mandate was formalized in the 1977 amendment to the Federal Reserve Act, which explicitly directs the Fed to promote these two objectives through its monetary policy (source, source).
Maximum employment refers to the highest level of employment that the economy can sustain without causing inflation to rise significantly. Price stability is defined as maintaining low and stable inflation, which is crucial for fostering a predictable economic environment conducive to investment and growth (source, source). The Federal Open Market Committee (FOMC), which is the Fed's monetary policymaking body, has established a long-term inflation target of 2% as most consistent with its price stability goal (source, source).
Analysis
The claim that the Federal Reserve's dual mandate includes full employment and price stability is supported by multiple credible sources. Governor Lisa D. Cook, in her speech at Harvard, reiterated that the Fed's statutory mandate is to promote maximum employment and stable prices, which she referred to as the dual mandate (source). This aligns with the Fed's own FAQ page, which clearly states that these two goals are the primary objectives of its monetary policy (source).
Moreover, the concept of a dual mandate is not unique to the U.S.; however, it is more explicitly defined in U.S. law compared to other central banks, which often prioritize price stability over employment (source, source). This distinction emphasizes the unique role of the Fed in balancing these two objectives, especially during periods of economic instability.
The reliability of these sources is high, as they originate from official Federal Reserve communications and reputable financial analysis platforms. The Fed's own publications are authoritative and reflect the institution's official stance on its monetary policy goals (source, source). Additionally, articles from financial education websites like Investopedia provide accessible explanations of complex economic concepts, further supporting the accuracy of the claim (source).
Conclusion
The claim that "The Federal Reserve's dual mandate includes full employment and price stability" is True. This is substantiated by the Federal Reserve Act and reinforced by various authoritative sources, confirming that these two objectives are central to the Fed's monetary policy framework.
