The FOMC statement and press conference on March 19 mark the beginning of the Yellen era at the Fed. Much of the current chatter has centered on the Fed’s communication, but a tension in its monetary policy strategy poses greater risks. The Federal Reserve’s statutory mandate directs the Fed to simultaneously promote two incongruent objectives: price stability and maximum employment. While delivering price stability is an appropriate goal and within the control of the central bank, maximum employment is neither.
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