"Economists and Wall Street analysts had mixed reactions to the mention of the Fed's often-unmentioned third task. Some experts told Fortune that even they had forgotten entirely about the long-term interest rate rule, while others said its fulfillment was implied by the commitment to price stability and employment. Some argued the subject is kept on the back burner by the Fed deliberately, and for good reason."
"One thing's for sure, while there may be a range of motivations for the Fed and its periphery to focus on the dual instead of the triple mandate, no one wants to see the third item dropped from the agenda. To do so, experts warn, would be to place both the central bank and the U.S. budget in jeopardy."
The Federal Reserve's statutory mandate comprises price stability, maximum employment, and moderate long-term interest rates. The third objective is frequently overlooked despite its inclusion in the Federal Reserve Act. Economists and Wall Street analysts hold mixed views: some had forgotten the long-term interest-rate rule, others see it as implied by price stability and employment, and some say the Fed intentionally sidelines it. The definition of 'moderate long-term rates' is ambiguous across instruments and policy aims. Experts warn that downgrading or abandoning the third objective could jeopardize central bank credibility and U.S. fiscal health.
Read at Fortune
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