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Economic Brief

December 2011, No. 11-12

The Federal Reserve's "Dual Mandate": The Evolution of an Idea

Aaron Steelman

Since 1977, the Federal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates" — what is now commonly referred to as the Fed's "dual mandate." The idea that the Fed should pursue multiple goals can be traced back to at least the 1940s, however, with shifting emphasis on which objective should be paramount. That such a mandate may, at times, create tensions for monetary policy has long been recognized as well.

Additional Resources

"Conduct of Monetary Policy," Hearings Before the U.S. House of Representatives Committee on Banking, Finance, and Urban Affairs, February 10 and March 30, 1982.

Federal Open Market Committee Meeting Transcript, January 31-February 1, 1995.

"Federal Reserve's First Monetary Policy Report for 1981," Hearings Before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, February 25 and March 4, 1981.

Humphrey-Hawkins Act (Full Employment and Balanced Growth Act of 1978), Public Law 95-523, October 27, 1978.

Mishkin, Frederic S., "Monetary Policy and the Dual Mandate," Address at Bridgewater College, Bridgewater, Va., April 10, 2007.

Santoni, G.J., "The Employment Act of 1946: Some History Notes," Federal Reserve Bank of St. Louis Review, November 1986, pp. 5-16.

Thornton, Daniel L., "What Does the Change in the FOMC's Statement of Objectives Mean?" Federal Reserve Bank of St. Louis Economic Synopses, 2011, no. 1.

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