Price stability

The fed wants/needs to see economic growth. As you know, they have put an extremely accommodative monetary policy in place for just that reason.

The point I want to make is that employment/economic growth (the current goal) hasn’t surpassed price stability as their key concern overall. In general, the most important issue to the Fed is price stability followed by employment/economic growth. Only because inflation is under control is economic growth their goal. In the event they see inflation rising to a level that they are uncomfortable with, they will act to control it at the expense of economic growth/employment.

As for more than one goal at a time, they can’t use their influence to step on the brakes to curb inflation while they step on the gas to get the economy going. They have to choose a restrictive monetary policy (putting the brakes on the economy) or an accommodative monetary policy (pushing the gas of the economy). They often try to find a middle ground but it never lasts for long.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s