Is The Fed Meeting Its Dual Mandate On The Economy?
Thursday, May 01, 2014
Yesterday’s report showing U.S. economic growth essentially stalled in the first quarter has renewed the debate over the Federal Reserve’s policies.
The Fed has two basic mandates: keeping inflation low and maximizing employment. In its policy statement yesterday, the central banking system said it would stay the course, keeping short-term interest rates low, but also continuing to pull back on its bond purchasing program by another $10 billion.
That bond purchasing program, also called quantitative easing, is meant to serve as an economic stimulus by reducing long-term interest rates.
The Fed began tapering the program early this year, saying that the economy was healthy enough to sustain a cut in the stimulus.
The program has been controversial both within the Fed and outside, with critics saying it will lead to inflation in the long term. Supporters say there is no threat of inflation on the horizon, with the economy stalling again and unemployment still weak.
Derek Thompson, senior editor at The Atlantic, discusses whether the Fed is meeting is dual mandate on the economy, with Here and Now’s Jeremy Hobson.