The Federal Reserve Act Section 2A states:
The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
Three goals are given, namely:
- Maximum employment;
- Stable prices; and
- Moderate long-term interest rates.
So why is it that many (or even most) writings* usually refer only to the dual mandate, i.e. the first two goals of maximum employment and stable prices? Why do they seem to ignore the third goal of moderate long-term interest rates?
Is it because the third goal is less important? Or perhaps because the third goal somehow follows automatically if the first two are fulfilled?
But wait a minute: None of this sounds like a dual mandate. Rather, it sounds as if Congress has given the Fed three mandates—if not four. Over the years, the mandates were boiled down to two: maximum employment and price stability. And now, some say the central bank can focus on price stability.