Price Stability, the Real Estate Hedge and the Federal Debt via The Commercial Observer

The Federal Reserve dropped a lead foot on monetary policy in late 2008 and intends to keep it there until you or someone you know finds a job.

If you’re reading The Commercial Observer, odds are you’re gainfully employed. The Fed’s attention is elsewhere, fixed on the more than 12 million Americans still lollygagging in the labor statistics. Price stability is the other half of the Fed’s mandate, but for now, employment is the larger challenge.

In battling unemployment, the central bank’s toolbox is limited to fairly blunt instruments. Its ultimate power rests in its ability to set the overnight rate. The Fed also exerts its influence over the market for Treasuries and other securities, though its sway is limited in this arena. In balancing interest rate policy with price stability, the Fed has been able to exercise a relatively free hand in the absence of higher rates of inflation.

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