U.S. Representative Mike Pence, chairman of the House Republican Conference, said he plans to introduce a bill tomorrow that would end the Federal Reserve’s dual mandate, forcing the central bank to focus on inflation.
“It’s time for the Fed to be solely focused on price stability and not the recently announced QE2,” said the 51- year-old lawmaker.
Inflation and inflation expectations are below what the Fed considers consistent with it’s mandate to keep price growth stable. As a result, even if the Republicans changed the mandate policy wouldn’t change.
In fact, the whole idea of a “dual mandate” is really just pleasant advertising – as the Fed believes that it can only stabilise economic activity insofar as it ensures that the inflation rate is at trend. In essence, even with a “dual mandate” they continue to respond to demand shocks (and not respond to supply shocks) in a way that is consistent with a “single mandate” to control inflation.