The Federal Reserve

January 3, 2014 • Volume 24, Issue 1
Should it continue trying to create more jobs?
By Peter Katel


Job seekers line up at a new Target store in San Francisco (Getty Images/Bloomberg/David Paul Morris)
Job seekers line up at a new Target store in San Francisco on Aug. 15, 2013. The nation's high unemployment rate is fueling an intense debate over what role the Federal Reserve should play in stimulating the economy. The Fed has a congressional mandate to fight inflation and spur job creation, but some experts say it should just focus on fighting inflation. (Getty Images/Bloomberg/David Paul Morris)

The nation's central bank, one of the government's least-understood — and most powerful — institutions, has been playing an ever-larger role in recent years in trying to stimulate economic recovery. The Federal Reserve is keeping interest rates low and buying billions of dollars in government bonds in hopes of encouraging banks to lend more money for business expansion, spurring companies to create more jobs. Outgoing Fed Chairman Ben S. Bernanke views both policies as following the central bank's congressional “dual mandate” to fight inflation and promote employment. But some experts say the jobs mandate only adds confusion because a central bank should focus on price stability. The bond-buying program is even more controversial, with many critics saying Wall Street, not Main Street, is reaping the rewards. Janet L. Yellen, awaiting likely Senate confirmation as Federal Reserve chair, acknowledges the concern but says ordinary Americans do benefit when the Fed keeps the economic pump primed.

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