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The Fed's three mandates

Weekly investor research

28 September 2015

China wins a very important concession on RMB inclusion in the SDR from the US, Brazil’s central bank signals impatience with recent FX volatility and Argentina changes regulations for local mutual funds’ pricing of USD denominated bonds. In the global backdrop, the Fed is vacillating on the question of hiking rates because it has to give greater than ever weight to financial markets as a consequence of its own policies to inflate these markets to bubble levels. The de facto adoption of a third mandate – preserve valuations in US stock and bond markets – undermines its credibility in meeting its traditional objectives and promises to bring the Fed into serious trouble when inflation returns.

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