Fed’s 3 Mandates: Price Stability, Jobs and ... Wall Street?

     In The New York Times article "Fed's 3 Mandate: Price Stability, Jobs, and ... Wall Street?" author Neil Irwin explains what the role of the Federal Reserve is in the market when looking towards the future. As we learned in class, the Federal Reserve is made up of a board of governors and the Federal Open Market Committee. The chairwoman of the Fed, Janet Yellen, presides over the institution that has the main goals of maximizing employment, stabilizing prices, and moderating long-term interest rates. In order to create changes in the markets. The Fed mainly targets the interest rates through the supply of money to attain these goals.
     Irwin's article is interesting because it focuses on the data and the information that these policy makers employ when making decisions about the economy. For example, as the article states, "should they rely on the information that appears on the financial data terminals many Fed officials keep on their desks, or on economic indicators conveniently collected in the Federal Reserve Economic Data database?" This is an interesting question because it impacts the policies that the Fed puts into place; if they are focusing on irrelevant data then they could mistakenly create a faulty policy that creates more harm than good.
     Furthermore, the article also delves into the idea of what the true role of the Federal Reserve is; as chairwoman, will Janet Yellen "wean the economy off what is often called 'the Greenspan put?' And should she?" Alan Greenspan, chairman of the Fed in the late 80s to the mid 2000s sort of coined this idea that "the central bank will forever stand willing to intervene to keep markets from falling too much." During his time as chairman, Greenspan used the Fed to stabilize the market after the crash of '87, but in more recent times, there has been controversy over whether the Fed should continually step into economic crises in order to stabilize the market or let the market return to its equilibrium over time. The main idea of the article is that with continual aid from the Fed, it appears like they are "stepping in to bail out the stock market — so much so that financial markets tend to price in lower future interest rates whenever there is a drop in the stock market, as has happened in the early weeks of 2016." It will be interesting to see how the market changes over 2016 and if it is due to policies created by the Fed or just the natural instincts of the market.

Article link: http://www.nytimes.com/2016/02/28/upshot/feds-3-mandates-price-stability-jobs-and-wall-street.html?ref=economy&_r=0