Rosengren Paper Finds FOMC Acts Like It has a Third Mandate

Federal Reserve officials often behave as if they have a mandate to take financial stability into account when they make interest-rate decisions, according to a research paper co-authored by Boston Fed President Eric Rosengren.

“Frequent mentions of financial instability terms at the FOMC, particularly during bust periods, result in a statistically significant reduction in the funds rate,” the paper said. “When it comes to financial instability concerns, not only do FOMC meeting participants talk the talk, but they also walk the walk,” it added, referring to the policy-setting Federal Open Market Committee.