The Fed has (unofficially) adopted a triple mandate

Federal Reserve Bank of San Francisco President John Williams said the central bank should avoid encouraging excessive financial risk-taking as it pursues its goals of full employment and stable prices.

“We’re exactly on the right track” with current policy, Williams said in an interview yesterday in San Francisco, predicting unemployment will fall to 5.5 percent by the end of next year and inflation will accelerate to about 1.7 percent. Trying to achieve the Fed’s goals sooner “would take policy actions that might have more negative effects,” he said.

Williams, who has consistently supported record(!) stimulus, said the Fed will probably continue paring its asset purchases and end them late this year. Central bankers should take care not to change their forward guidance on the path of interest rates in a way that eases policy too much, he said.

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