George Selgin says we should do away with it:
The Federal Open Market Committee is in a pickle. After its last meeting, it suggested that it would soon start raising interest rates as a way to head off inflation. Recent inflation numbers, showing an uptick in the core inflation rate, make that step seem as necessary as ever.
But disappointing growth projections, along with the dollar's international appreciation, are giving committee members cold feet.
The FOMC's dilemma is rooted in the Fed's so-called "dual mandate," calling for it to achieve both "maximum employment" and "stable prices." Whenever inflation and employment seem to be headed in opposite directions, the Fed has to compromise.
Wrong compromises aggravate the business cycle; and even if the compromises are correct, the Fed's uncertain direction puts a damper on growth.
Realizing its flaws, some favor just scrapping the dual mandate's "maximum employment" clause, leaving the Fed with a solitary inflation target.
The dual mandate's champions reply that, while inflation targeting might make monetary policy more predictable, it could also call for the Fed to tighten at times — the present might just be one of them — when doing so means putting the brakes on an already slowing economy.
So what's best, a slippery dual mandate or a stable-inflation straitjacket? Neither.