Dual mandate to manage the aggregate price level

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The Federal Reserve has a dual mandate to manage the aggregate price level (inflation) and employment in the US economy. Some economists argue that these two objectives may sometimes cause the Fed to focus too much on employment and cause problems with the price level. For example, employment growth since the last recession has been slower than expected, and the Fed has maintained historically low interest rates in order to encourage business activity that may support hiring. However, some people argue that this interest rate policy has hurt savers who would benefit from higher interest rates, and it has also caused potential bubbles in stock prices and other assets. In your opinion, should the Fed continue to focus on employment, even if the dual mandate causes trouble elsewhere in the economy?

Reference no: EM13807949

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