What is the Federal Reserve Hiding from Us?

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"The most inappropriate monetary policy that I've seen maybe in my lifetime."- Paul Tudor Jones on the Federal Reserve via CNBC

The Federal Reserve has three mandates per its congressional charter: to effectively promote maximum employment, stable prices, and moderate long-term interest rates. The Fed has met the first goal; employment is largely maximized. As far as the other two, the Fed is running monetary policy consistent with destabilizing prices and doing it with interest rates that are well below moderate.

Why is it employing the "most inappropriate monetary policy" that famed investor Paul Tudor Jones has seen in his lifetime? The better question is whether such an aggressive policy, which purposely goes against its mandate, is hiding something.

Fed mandate scorecard

To provide context to the questions, let's review the three Fed mandates and compare their current standing to the past.

Maximum employment

The unemployment rate is slightly above the average of the five years leading up to the pandemic but more than 1% less than the longer-term average. The two alternative employment measures, which factor in job openings and those willingly quitting jobs, show the adjusted unemployment rate is well below the 20-year average.

Traditional measures of employment are essentially fully recovered from the pandemic. Alternative measures, such as those above, tell us the labor market is healthier than at almost any time in the last 20 years.