This is the Cato Daily Podcast for Thursday, April 21st, 2022.

I'm Caleb Brown.

It's an idea that should gain some currency in our current high inflation environment give the Federal Reserve just one thing to worry about.

Economist Alexander William Salter of Texas Tech argues that it would at the very least give the largely amateur economists in Congress a chance to

nail down fed officials on meeting their obligations. The Federal Reserve has

two mandates that exist in tension with one another that is a mandate for full employment and a

mandate for price stability.

So how in your, how has that complicated the Fed's job?

It's complicated the Fed's job in a number of ways.

So here's something that your readers and listeners might not actually know.

Technically, the Federal Reserve has a triple mandate. Its full employment, stable prices,

and moderate long-term interest rates.

Everybody just sort of agreed via a gentleman's agreement

to sort of ignore the last part of that

because they understood that the Federal Reserve

doesn't really have control over interest rates.

Those are set in global capital markets determined by supply and demand.

As powerful as the Fed is, it can influence those rates, but it can't really control them in any meaningful sense.

That's why they call it a target.

Right.

And so what's interesting about that is there was no formal repudiation of that part of the

mandate.

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