<p>First, this is not change in mandate, Fed cannot just change its mandate unilaterally, as the mandate is given to Fed by US congress (see <a href="https://www.richmondfed.org/publications/research/economic_brief/2011/eb_11-12#:%7E:text=Since%201977%2C%20the%20Federal%20Reserve,goals%20can%20be%20traced%20back" rel="nofollow noreferrer">this</a> Fed Richmond essay on that)  this is just change in its goals in pursuit of their current mandate.</p>
<blockquote>
<p>Does &quot;maximum employment&quot; mean potential rate of employment?</p>
</blockquote>
<p>According to Fed '<a href="https://www.federalreserve.gov/faqs/what-economic-goals-does-federal-reserve-seek-to-achieve-through-monetary-policy.htm#:%7E:text=As%20a%20result%2C%20the%20goals,maintaining%20a%20stable%20inflation%20rate." rel="nofollow noreferrer">maximum employment</a>' means:</p>
<blockquote>
<p>Maximum employment is the highest level of employment or lowest level of unemployment that the economy can sustain while maintaining a stable inflation rate.</p>
</blockquote>
<p>So taken at face value this would mean that by 'maximum employment' they mean  non-accelerating inflation rate of unemployment (NAIRU).</p>
<blockquote>
<p>In what way does the substitution of &quot;deviations&quot; for &quot;shortfalls&quot; change the mandate?</p>
</blockquote>
<p>It does not change the mandate at all, it changes the Fed's goals in pursuit of their current mandate. A deviation by definition means either positive or negative change from the target (eg unemployment being either above or below their target). If they only look at a shortfall from the target level that would mean they are only concerned if unemployment is above the target but not if it is below.</p>

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2021-04-05T19:38:52.373Z
1muflon1 many thanks for the precisions ;)
An old man in the sea.
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2021-04-05T18:52:10.173Z
2021-04-05T19:05:26.507Z
2021-04-05T19:05:26.507Z
1muflon1
<p>In this <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20200827a.htm" rel="nofollow noreferrer">Fed link</a>, it's stated that 1 of the most important changes in the document describing the Fed mandate/framework, is</p>
<blockquote>
<p>On maximum employment, the FOMC emphasized that maximum employment is
a broad-based and inclusive goal and reports that its policy decision
will be informed by its &quot;assessments of the shortfalls of employment
from its maximum level.&quot; The original document referred to &quot;deviations
from its maximum level.&quot;</p>
</blockquote>
<ol>
<li>Does &quot;maximum employment&quot; mean potential rate of employment?</li>
<li>In what way does the substitution of &quot;deviations&quot; for &quot;shortfalls&quot; change the mandate?</li>
</ol>

<macroeconomics><federal-reserve>
Update of Fed mandate(2020) - "shortfalls of employment"
An old man in the sea.
# Update of Fed mandate(2020) - "shortfalls of employment"

(Asked by: username_0 on 2021-04-05)

In this [Fed link](https://www.federalreserve.gov/newsevents/pressreleases/monetary20200827a.htm), it's stated that 1 of the most important changes in the document describing the Fed mandate/framework, is

> On maximum employment, the FOMC emphasized that maximum employment is
> a broad-based and inclusive goal and reports that its policy decision
> will be informed by its "assessments of the shortfalls of employment
> from its maximum level." The original document referred to "deviations
> from its maximum level."

1. Does "maximum employment" mean potential rate of employment?
2. In what way does the substitution of "deviations" for "shortfalls" change the mandate?

**Tags:** macroeconomics, federal-reserve


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## 1 answers

### Answer by username_1 on 2021-04-05. Score: 2 | Accepted answer

First, this is not change in mandate, Fed cannot just change its mandate unilaterally, as the mandate is given to Fed by US congress (see [this](https://www.richmondfed.org/publications/research/economic_brief/2011/eb_11-12#:%7E:text=Since%201977%2C%20the%20Federal%20Reserve,goals%20can%20be%20traced%20back) Fed Richmond essay on that) this is just change in its goals in pursuit of their current mandate.

> Does "maximum employment" mean potential rate of employment?

According to Fed '[maximum employment](https://www.federalreserve.gov/faqs/what-economic-goals-does-federal-reserve-seek-to-achieve-through-monetary-policy.htm#:%7E:text=As%20a%20result%2C%20the%20goals,maintaining%20a%20stable%20inflation%20rate.)' means:

> Maximum employment is the highest level of employment or lowest level of unemployment that the economy can sustain while maintaining a stable inflation rate.

So taken at face value this would mean that by 'maximum employment' they mean non-accelerating inflation rate of unemployment (NAIRU).

> In what way does the substitution of "deviations" for "shortfalls" change the mandate?

It does not change the mandate at all, it changes the Fed's goals in pursuit of their current mandate. A deviation by definition means either positive or negative change from the target (eg unemployment being either above or below their target). If they only look at a shortfall from the target level that would mean they are only concerned if unemployment is above the target but not if it is below.

> **Comments:**
> **username_0**: username_1 many thanks for the precisions ;)  

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