Mainstream Economic Analysis and the Case for Accommodation

Abstract

The Federal Reserve has a dual mandate to foster both full employment and price stability. Most often these two goals are in alignment, so policies that support one objective generally support the other. However, at times the two aims can be at odds. When that happens, policies that target one goal may lead to misses on the other one. This article argues that taking a balanced approach between competing choices provides a solution that is in agreement with mainstream monetary policy rules.