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The two goals Congress gave the Fed: stable prices and maximum employment.
Why It Matters
The dual mandate is the reason the Fed exists in its modern form. Stable prices (often described as a roughly 2% inflation goal) and maximum employment can pull in opposite directions — cooling inflation usually means higher rates, which can slow hiring. That trade-off explains why the Fed weighs decisions instead of following a simple rule.
Key Points
- Formalized by Congress in 1977
- Price stability is commonly associated with a ~2% inflation goal
- The two goals can conflict, forcing the Fed to balance them
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The Fed's Dual Mandate
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Common Questions
The two goals Congress gave the Fed: stable prices and maximum employment. The dual mandate is the reason the Fed exists in its modern form. Stable prices (often described as a roughly 2% inflation goal) and maximum employment can pull in opposite directions — cooling inflation usually means higher rates, which can slow hiring.
The dual mandate is the reason the Fed exists in its modern form. Stable prices (often described as a roughly 2% inflation goal) and maximum employment can pull in opposite directions — cooling inflation usually means higher rates, which can slow hiring. That trade-off explains why the Fed weighs decisions instead of following a simple rule.
Formalized by Congress in 1977
Price stability is commonly associated with a ~2% inflation goal
The two goals can conflict, forcing the Fed to balance them