Fed’s Dual Mandate to Get Close Look from Congressional Task Force: Report

The Federal Reserve’s dual mandate—balancing maximum employment and price stability—is about to get a close look from a new congressional task force, according to a Reuters report. The task force is gearing up to look at how the Fed determines monetary policy and whether it’s time to rethink the pecking order, perhaps placing price stability ahead of employment.

With unemployment and inflation well off their pandemic peaks, the Federal Reserve’s dual mandates seem to be heading in the right direction. Still, the sharp interest-rate hikes in 2022 and 2023, intended to combat 40-year-high inflation, have led Representative Frank Lucas (R-OK), chair of the Fed oversight task force, to ponder if the central bank’s tactics were less than ideal due to their negative side effects.

“A substantial number of my Financial Services Committee colleagues and the chairman want to discuss that issue,” Lucas told Reuters in an interview on Monday. “Is there really a dual mandate? And how does that affect the primary mandate of price stability?”

“If your primary focus is price stability, and if you want the forces of the economy to be able to make decisions, then a more rules-focused process provides certainty to that,” Lucas said ahead of the first hearing next week of the Monetary Policy, Treasury Market Resilience, and Economic Prosperity Task Force.

The Federal Reserve has acknowledged that it delayed the start of its rate-hiking efforts too long, with inflation proving more stubborn than it had anticipated based on the most recent figures. Meanwhile, a growing number of voices contend that the Fed moved too hastily to lower rates late last year, given that inflation remained above the 2% goal and unemployment continued at low levels.

Lucas acknowledged the difficulty of modifying the Federal Reserve Act, considering the slim Republican control in Congress and the long-standing nature of the dual mandate. However, he remains optimistic that his efforts could lead to legislative proposals, reports, or guidance directed at the Fed, according to Reuters.