What is the Federal Reserve's dual mandate?

The Federal Reserve's dual mandate consists of promoting maximum employment and ensuring stable prices. This dual objective reflects the Fed's commitment to fostering a healthy economy.

Maximum employment refers to the goal of achieving the lowest unemployment rate possible without triggering inflation, which is beneficial for economic growth and stability. A strong labor market leads to higher consumer spending, which in turn drives economic activity.

Stable prices are crucial for maintaining the purchasing power of money and providing a predictable economic environment for consumers and businesses. When prices are stable, it reduces uncertainty and helps individuals and firms make informed financial decisions.

Together, these two objectives aim to achieve a balance that supports sustainable economic growth. The focus on both aspects is vital since neglecting one can lead to adverse effects on the economy, such as rising inflation or increased unemployment.