Will the Fed’s Third Mandate Derail Markets?

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The Federal Reserve's congressionally chartered dual mandates are price stability and maximum sustainable employment. These objectives are intended to dictate monetary policy and the Fed's longer-run goals and strategies. Recent experience, however, shows that a third mandate – preventing financial instability – trumps the Fed’s congressional decrees.

The illustration below from the Federal Reserve Bank of Chicago illustrates its mandates. The "Dual Mandate Bullseye" highlights its 2% core inflation rate and 4.1% unemployment rate objectives.