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Fed Dual Mandate Under Threat if Taper Begins

Fed chairman Ben Bernanke has defined the purpose of the asset purchases as “to increase the economy’s near-term momentum,” with the goal of improving the labor market and price stability. This would reflect the key objectives for monetary policy in the Federal Reserve Act: Maximum employment, stable prices, and moderate long-term interest rates.

But the reality is that the current structural unemployment does not make possible full employment; price development is deflationary, or disinflationary; and interest rates have been kept historically low while moderation has been achieved through nontraditional monetary policies.

Nonetheless, the Fed will begin tapering, despite the ailing labor market. In the process, its postwar dual mandate—full employment and low inflation—will crumble.

via CNBC [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza
Alfonso Esparza

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