New Fed Chair Kevin Warsh Shifts Focus Away from Employment Goal
8 reported2 unconfirmed
According to an NPR report, new Federal Reserve Chair Kevin Warsh is signaling a reduced emphasis on the employment component of the Fed's dual mandate, which requires the central bank to pursue both price stability and maximum employment. The report notes that Congress gave the Fed this dual mandate in the late 1970s. During his first press conference last month, Warsh expressed skepticism about the phrasing of maximum employment as a "broad based and inclusive goal," which the Fed had adopted in 2020. He stated that he does not share the view that the Fed must decide whether to tolerate higher inflation to put more people to work. The report also notes that the Fed's recent statement removed an explicit reference to maximum employment, though it still mentioned the dual mandate. Economist Claudia Sahm, a former Fed employee, said she does not like these changes and noted that Warsh has not explained how he defines maximum employment.
What’s reported
The Federal Reserve has a dual mandate from Congress: price stability and maximum employment.
New Fed Chair Kevin Warsh is talking less about employment, according to the report.
In 2020, the Fed described maximum employment as a "broad based and inclusive goal."
Warsh expressed skepticism about that phrasing during his first press conference last month.
Warsh said he believes low prices and strong employment can be mutually compatible.
The Fed's recent statement removed an explicit reference to maximum employment.
Economist Claudia Sahm, a former Fed employee, said she does not like these changes.
Sahm stated that historically, when the two parts of the dual mandate are in tension, the Fed focuses on the more urgent matter, and inflation is currently the priority.
Open questions
How Kevin Warsh defines maximum employment.
What the Fed under Warsh would do if the labor market started to weaken.
Key figures
Kevin Warsh, new Federal Reserve Chair
Claudia Sahm, economist and former Federal Reserve employee
Wailin Wong, NPR reporter
Darian Woods, NPR reporter
Sources: NPR
