Price Stability Act of 2025
Summary
The Price Stability Act of 2025 aims to amend the Federal Reserve Act by removing the mandate for the Federal Reserve to focus on maximum employment. The bill seeks to prioritize stable prices as the sole objective of the Federal Reserve's monetary policy. This would alter the current dual mandate, which directs the Fed to pursue both maximum employment and stable prices.
Expected Effects
If enacted, the Federal Reserve would likely shift its focus primarily to controlling inflation, potentially leading to higher interest rates. This could impact employment levels as the Fed would no longer be explicitly required to consider the employment rate in its monetary policy decisions. The change could also affect economic growth depending on how effectively the Fed manages inflation without unduly hindering job creation.
Potential Benefits
- Could lead to greater price stability, reducing inflation and making it easier for individuals and businesses to plan for the future.
- May enhance the credibility of the Federal Reserve in maintaining price stability.
- Could reduce uncertainty in financial markets related to inflation expectations.
- Could lead to more predictable monetary policy decisions focused solely on price levels.
Potential Disadvantages
- Could lead to higher unemployment rates if the Federal Reserve prioritizes price stability over employment.
- May disproportionately affect lower-income individuals who are more vulnerable to job losses.
- Could slow down economic growth if the Federal Reserve's focus on inflation leads to tighter monetary policy.
- May reduce the Federal Reserve's flexibility in responding to economic downturns.
Most Disadvantaged Areas:
Constitutional Alignment
The Constitution grants Congress the power to coin money and regulate the value thereof (Article I, Section 8). This implies some authority over monetary policy. However, the specific mandate given to the Federal Reserve is a matter of statutory law, not directly dictated by the Constitution. The constitutionality of altering the Fed's mandate is unlikely to be challenged successfully, as Congress has broad authority to modify existing laws.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).