Macro Policy · Core
Dual Mandate
The Fed’s dual mandate is maximum employment and stable prices — two goals that agree in a demand shock and fight in a supply shock.
Definition
Statute (1977) names jobs and prices (and, in the same breath, moderate long-term rates). The 2% PCE target is the Fed’s operationalization of prices, not the statute’s number. Maximum employment is not a single U* forever.
Why it matters
Every hike/cut debate is a mandate trade-off. ‘Higher for longer’ is a price-stability choice when jobs are still fine.
Case
2021: the Fed called inflation transitory to protect the jobs side. 2022: it hiked into a still-strong labor market. Same mandate, different dominant gap.
How to read it
Which gap is larger (inflation vs jobs) and how they measure each. The mandate does not tell you the lag.
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