BOSTON, April 12 A top Federal Reserve official
on Friday defended the U.S. central bank's dual mandate of full
employment and price stability, and pointed to economic trends
that suggest an even more accommodative policy stance might have
been needed since the Great Recession.
Boston Fed President Eric Rosengren, redoubling his support
of the currently very easy U.S. monetary policies, argued the
Fed's inflation record over the past 15-20 years has been as
good as or better than central banks in Europe that have only a
single price-stability mandate.
In keeping one eye officially on unemployment, the Fed is
unusual in a developed world where central bankers are typically
tasked solely with maintaining price stability.
Highlighting the records of the European Central Bank, the
Bank of England, and Sweden's Riksbank, Rosengren went so far as
to suggest that central banks that focused only on inflation may
want to consider adopting a U.S.-style dual mandate.
In prepared remarks for a Boston Fed conference, he said
such a move, for example, would make it easier to publicly
explain buying bonds when inflation is running above target, as
that trio has done in the wake of the global recession.
"The dual mandate in the United States has been criticized
by some for providing an inflationary bias. However, the data
show little such evidence," he told the conference on fulfilling
the U.S. central bank's mandate of full employment, for which it
aims along with a 2-percent inflation target.
"The dual mandate in the United States has provided a clear
and transparent way to communicate the need for aggressive
While the Fed has adopted extraordinarily easy policies to
lower joblessness and raise inflation in the wake of the
2007-2009 recession, central banks such as the BoE have also
launched accommodative bond-buying programs despite
higher-than-desired inflation rates.
With a touch of levity, Rosengren said that may only prove
that "all of us are dual mandate banks at heart."
The Fed is buying $85 billion in Treasury and mortgage
securities per month and has promised to keep interest rates
near zero for a long while more to support the stop-start U.S.
The U.S. unemployment rate was 7.6 percent last month,
higher than the 5-6 percent range to which Americans are
accustomed. On the other side of the mandate, the Fed's
preferred measure of inflation is below target at around 1.3
While policy doves like Rosengren currently hold sway over
Chairman Ben Bernanke and the majority of Fed policymakers,
minutes from last month's policy meeting suggest the
quantitative easing program could draw to a close by year end,
earlier than some economists had expected.
Rosengren however said there remains "strong rationale for
continuing our highly accommodative monetary policy," and he
predicted inflation will remain "well below" the 2-percent
target over the next two years, paving the way for more easing.
Doubling down on his stance, he said the fact that the
United States has historically had a tighter inflation range and
broader unemployment range than that of the euro zone, Britain
and Sweden suggests the Fed could have been even more
stimulative over the past five years.