The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.
- BLS Handbook of Methods
- Bureau of Economic Analysis
- Bureau of Labor Statistics
- Congressional Budget Office
- Economic Data - FRED® II, St. Louis Fed
- Office of Management and Budget
- Statistics: Releases and Historical Data, Board of Governors
- U.S. Census Bureau Economic Programs
- White House Economic Statistics Briefing Room
March 01, 2013
What the Dual Mandate Looks Like
Sometimes simple, direct points are the most powerful. For me, the simplest and most direct points in Chairman Bernanke’s Senate testimony this week were contained in the following one minute and 49 seconds of video (courtesy of Bloomberg):
At about the 1:26 mark, the Chairman says:
So, our accommodative monetary policy has not really traded off one of [the FOMC’s mandated goals] against the other, and it has supported both real growth and employment and kept inflation close to our target.
To that point, here is a straightforward picture:
I concede that past results are no guarantee of future performance. And in his testimony, the Chairman was very clear that prudence dictates vigilance with respect to potential unintended consequences:
Highly accommodative monetary policy also has several potential costs and risks, which the committee is monitoring closely. For example, if further expansion of the Federal Reserve's balance sheet were to undermine public confidence in our ability to exit smoothly from our accommodative policies at the appropriate time, inflation expectations could rise, putting the FOMC's price stability objective at risk...
Another potential cost that the committee takes very seriously is the possibility that very low interest rates, if maintained for a considerable time, could impair financial stability. For example, portfolio managers dissatisfied with low returns may reach for yield by taking on more credit risk, duration risk, or leverage.
Concerns about such developments are fair and, as Mr. Bernanke makes clear, shared by the FOMC. Furthermore, the language around the Fed’s ultimate decision to end or alter the pace of its current open-ended asset-purchase program is explicitly cast in terms of an ongoing cost-benefit analysis. But anyone who wants to convince me that monetary policy actions have been contrary to our dual mandate is going to have to explain to me why that conclusion isn’t contradicted by the chart above.
By Dave Altig, executive vice president and research director of the Atlanta Fed
TrackBack URL for this entry:
Listed below are links to blogs that reference What the Dual Mandate Looks Like:
- Following the Overseas Money
- The Impact of Extraordinary Policy on Interest and Foreign Exchange Rates
- Using Judgment in Forecasting: Does It Matter?
- Does Lower Pay Mean Smaller Raises?
- Outside Looking In: Why Has Labor Force Participation Increased?
- Wages Climb Higher, Faster
- Is There a Gender Wage Growth Gap?
- The Price Isn't Right: On GDPNow's Third Quarter Miss
- Is Wage Growth Accelerating?
- Unemployment Risk and Unions
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- Business Cycles
- Business Inflation Expectations
- Capital and Investment
- Capital Markets
- Data Releases
- Economic conditions
- Economic Growth and Development
- Exchange Rates and the Dollar
- Fed Funds Futures
- Federal Debt and Deficits
- Federal Reserve and Monetary Policy
- Financial System
- Fiscal Policy
- Health Care
- Inflation Expectations
- Interest Rates
- Labor Markets
- Latin America/South America
- Monetary Policy
- Money Markets
- Real Estate
- Saving, Capital, and Investment
- Small Business
- Social Security
- This, That, and the Other
- Trade Deficit
- Wage Growth