"Reevaluating the Fed's Mandate in a Changing Interest Rate Landscape"

The Federal Reserve's mandate should be updated to include an explicit objective of financial market stability, as monetary policy cannot be separated from financial stability. The Fed's current inflation target of 2% a year takes no account of asset prices, leaving the stability of financial markets to regulation and supervisors. However, even the best regulatory regime will not be able to keep up with financial innovation, and will need support from monetary policy. Having financial stability as part of the Fed's formal mandate would force explicit recognition of the issue and help forestall additional crises.