From the Federal Open Market Committee statement, consider the Fed’s statutory mandate, also known as its dual
mandate. Which of the following best describes the Fed’s policy goals under its mandate?
a.An inflation rate near 0% (stable prices) and output equal to potential, which means an unemployment rate of about 5%.
b.An inflation rate near 2% and output above potential, which means an unemployment rate less than 5%.
c.An inflation rate near 0% (stable prices) and output above potential, which means an unemployment rate less than 5%.
d.An inflation rate near 2% and output equal to potential, which means an unemployment rate of about 5%.
Federal reserve statement:
Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier last year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2- 1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes. In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.