The Fed’s Mandate

Federal Reserve Chairman Jerome Powell’s present term expires next year. The editors of the Wall Street Journal are unimpressed by his performance to date. Failings include

  • Potential ethical violations on the part of Fed governors
  • Inflation significantly in excess of estimates
  • Maintaining the easiest monetary policy in Fed history

They comment:

Wall Street desperately wants Mr. Powell to be reappointed to a new four-year term, and no wonder given how his policies have lifted asset prices. President Biden may agree, since there’s little tightening of policy on the horizon.

Notice how much the qualifications for a Fed Chairman have changed. It used to be that credibility on prices was essential. Now if you miss your consumer-price target by a mile, but keep asset prices inflated, you’re the favorite.

Famously, the Federal Reserve has a dual mandatw:

  • Price stability
  • Maximization of employment

Over the years that has transmogrified from the plain language of the empowering legislation first to maintaining a consistent rate of increase in prices and now to a consistent acceleration in increase in prices and largely ignoring employment. Neither of the two things it has been trying to do—”running the economy” and keeping equity values high—fall within their mandate. Mr. Powell either needs to start doing his job, resign, or be fired for nonfeasance.

1 comment… add one
  • Grey Shambler Link

    When the Federal Reserve was created in 1913, women in the workforce were around 20%. Today at 60%.
    Maximizing employment then and now represent different agendas, sorry, mandates.
    We’re not at total war status, all of our emergencies are exaggerated if not manufactured.
    President Biden has plans to spend over 80 Billion on state sponsored daycare to free American mothers from motherhood, I’m sure Chairman Xi is nodding his head.

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