The Fed's Unspoken Mandate

The U.S. Federal Reserve’s two main goals are to promote maximum employment and keep inflation close to 2 percent. But it also acts as if it has another, unspoken mandate: Don’t do anything too radical in pursuit of those goals. This allegiance to what’s considered “normal” harms a lot of people, black Americans in particular.

Consider what happened in November 2010, when the economy was just starting to recover from a deep recession. Many Fed officials expected the unemployment rate to remain above 7 percent, and inflation below 1.5 percent, for the next few years -- a situation that clearly called for more stimulus, assuming that the central bank was willing to do “whatever it takes” to achieve its macroeconomic objectives. Yet the Fed chose not to signal a longer period of low short-term interest rates or increase bond purchases aimed at bringing down long-term interest rates. Policy makers saw such steps as being too unusual relative to “normal” monetary policy.