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Trade-offs in Fulfilling the Fed’s Dual Mandate

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  • Felipe Schwartzman

Abstract

This article discusses the trade-offs and impacts of inflationary environments given the dual mandate of the Federal Reserve. High inflation creates pricing distortions and leads to a tax on liquidity. Furthermore, it has direct redistributive impacts of inflation on wages, portfolios and contracts that are preset in dollar terms. The analysis concludes that while inflationary trade-offs are complex, keeping expectations anchored is a paramount objective for the Fed, since unanchored expectations make all the other trade-offs harder to navigate.

Suggested Citation

  • Felipe Schwartzman, 2023. "Trade-offs in Fulfilling the Fed’s Dual Mandate," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 23(08), March.
    • Handle: RePEc:fip:fedreb:95727
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    File URL: https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-08
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