> Fed will have to reverse course, sacrificing the dollar to maintain asset prices and ability to finance government.
It's not within the fed's mandate to worry about the price of the dollar or equity prices (until employment is impacted), is it?
It's not within the fed's mandate to worry about the price of the dollar or equity prices (until employment is impacted), is it?
"Price stability": sounds like no inflation or deflation to me, but in fact they pursue some non-zero amount of inflation, usually 2-3%.
"Full employment": sounds like 0% unemployment to me, but in fact they target some non-zero value, around 5% I think.
Targeting equity prices or other asset prices is not officially within their mandates, but given their behavior at times (e.g. suddenly dropping dovish comments when the market drops), one might start to think this is a de facto or shadow mandate. :)
I think worrying about the price of the dollar is closely related to the level of inflation or uh "price stability" they are aiming for.
EG:
https://www.frbsf.org/our-district/press/presidents-speeches...
"Let me start with the Fed’s mission. It’s often said that Congress assigned the Federal Reserve a dual mandate: maximum employment and stable prices. But, that’s not quite accurate. In fact, the Fed has a triple mandate..."
Also: https://www.richmondfed.org/-/media/richmondfedorg/publicati...
3-5% sounds plausible. Even with full employment, people will be unemployed for short periods of time while they're between jobs. And these phases are going to get more significant in a gig economy, where you don't stay at the same company for 40 years anymore.
Similarly, as a large-scale landlord, you can always expect some 3% of your apartments to be vacant even in markets with high demand because some time passes between the old tenant moving out of an apartment and the new tenant moving in. (Source: My father is working in that business.)