Federal Reserve Chairman Jerome Powell’s obsession with the “dual mandate” was upstaged this week by a rogue third mandate—moderate long-term interest rates—that’s been sulking in the shadows since the 1970s. The forgotten rule, dusted off by Trump appointee Stephen Miran, has Wall Street wondering if the Fed’s been playing hooky on its homework.
Picture this: the Federal Reserve, that stoic guardian of America’s economy, has been caught skipping a third of its job description. Stephen Miran, the new kid on the Federal Open Market Committee (FOMC), dropped the bombshell during his Senate confirmation, reminding everyone that the Fed’s 1970s playbook includes price stability, maximum employment, and moderate long-term interest rates.
Economists across the land gasped, clutching their calculators in disbelief. “Moderate what now?” muttered one Wall Street analyst, who admitted to Fortune that the third mandate was as forgotten as a flip phone in a smartphone world.
Some experts claim the Fed’s been slyly ignoring this mandate on purpose, like a teenager dodging chores. After all, “moderate long-term rates” is vaguer than a politician’s promise—does it mean 10-year Treasury yields, 30-year bonds, or just a vibe of financial zen?
Jerome Powell, ever the smooth talker, brushed off the oversight in his press conference like a cat pushing a glass off a table. “We think of it as a dual mandate because, you know, stable inflation and jobs basically cover the interest rate thing,” he said, probably hoping no one noticed the fine print.
But economists like Dr. Steve Kamin from the American Enterprise Institute called the third mandate a “vestigial remnant,” like the Fed’s economic appendix—still there, but nobody’s sure why. Meanwhile, RSM U.S.’s chief economist Joe Brusuelas argued the Fed’s been nailing all three mandates by tweaking short-term rates, which apparently moonlight as financial puppet masters.
The real kicker? The Fed has about as much control over long-term rates as a toddler has over a bouncy castle. Professor Kent Smetters from Wharton pointed out that government debt is the real puppeteer here, and the Fed’s too polite to scold Congress for its spending sprees.
“It’s like the Fed’s afraid to give Congress a timeout,” Smetters quipped, noting that any finger-wagging could spark a political tantrum. The Fed’s independence is shakier than a Jenga tower in a windstorm, so they keep mum.
Wall Street’s verdict? Don’t mess with the mandate. Dropping the third task would be like telling markets the U.S. is done caring about its debt, sending bond investors running faster than shoppers at a Black Friday sale.
Even worse, if Congress starts tinkering with the Fed’s rulebook, it could signal a government takeover of the bond market. “That’s a one-way ticket to Investor Panicville,” warned Elyse Ausenbaugh from J.P. Morgan Wealth Management, who’s clearly not here for a Fed remix.
Despite the oversight, experts agree the Fed’s been quietly acing its triple mandate, like a student who skips study hall but still gets an A. “Powell doesn’t need to shout about long-term rates,” Brusuelas said, “because the Fed’s tending to them like a secret garden nobody visits.”
As the Fed tiptoes around its forgotten mandate, one thing’s clear: Powell’s not about to start preaching about long-term rates anytime soon, lest he be laughed out of the press room like a stand-up comic bombing a set. Here’s hoping the Fed keeps juggling all three mandates, or we might all be paying for Congress’s spending spree with interest rates higher than a giraffe’s mortgage.
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