"[T]here are several reasons to believe that QE2 would not have happened had Fed officials not been able to refer to a dual mandate in the Federal Reserve Act as justification for the intervention. First consider this bit of emprical evidence: There have never been so many references to the dual mandate by Fed officials as in the past year or so. If the dual mandate was not a factor in justifying and embarking on QE2, then why did Fed officials find the need to refer to it so much as justification for QE2 in the past year? In contrast, during the 1980s and 1990s, Federal Reserve officials rarely referred to the dual mandate (even in the early 1980s when unemployment was higher than today), and when they did so it was to make the point that achieving the goal of price stability was the surest way for monetary policy to keep unemployment down. Now, as Paul Ryan and I put it, “Advocates of aggressive Fed interventions cite the ‘maximum employment’ aspect of the Fed’s dual mandate.”" Read more.
"Impacts of Proposed Changes in the Fed's Mandate"
John B. Taylor
Wall Street Pit, December 28, 2010.
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