Actually if you look at the law, unemployment is listed first, inflation second.
But certainly the FED would act to avoid deflation because it leads to massive unemployment.
if you look at the law, unemployment is listed first, inflation second.
We hear that a lot but here's the actual law and it doesn't say that; all it's got is stuff about what a 'good' economy is supposed have. So what the Federal Reserve says is that--
"...maximum employment could best be achieved by achieving price stability..."
"...the Committee could achieve its dual mandate by achieving the price stability objective..."
--and no matter what the 1978 law should have said and was meant to have said, the Fed's tools stay the same. They affect prices, and that's why the Fed admitted that the 1978 law did not affect:
"...the Committees view about how and the extent to which monetary policy is capable of increasing the level of output beyond achieving price stability."