The Fed’s Meaningless Mandate

Part of the right wing’s new deflationist kick is to gin up all this talk about how we need to eliminate the Fed’s dual mandate in favor of a unitary focus on inflation. I think the implicit conclusion that we need tighter money is wrong, and the implicit conclusion that the Fed cares too much about fighting unemployment is wrong, but it’s true that the current mandate is deeply problematic.

Why? It’s the accountability, stupid. Or more specifically, the lack thereof. Check out this FOMC statement:

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated; however, the Committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline toward levels that the Committee judges to be consistent with its dual mandate.

And what level might that be? It’s a secret! The right thing to do would be to give the Fed a specific target and hold the FOMC accountable for hitting it.