Don't Tinker With the Fed's Dual Mandate
Posted at 9:30 a.m. on Dec. 26, 2012
The Federal Reserve has been particularly active in its efforts to support the economy as it slowly recovers from the recent recession, leading monetary conservatives to push for removal of the employment prong of the Fed’s mandate. Ramesh Ponnuru doesn’t think this is a very good idea.
“Supporters of the bill respond…criticism by noting that the Fed started taking unorthodox steps, such as quantitative easing, at the same time that it began mentioning unemployment in justifying its decisions.”
“What they are ignoring is something else that happened around the same time: a financial crisis and severe recession. Inflation slowed, unemployment soared and interest rates were so low that unorthodox moves were the only way to loosen monetary policy. A Fed afraid of deflation and blind to unemployment could, and probably would, have taken the same steps.”