What is the Federal Reserve's dual mandate, and why does it matter for how you read policy?

Congress charges the Fed with two goals: maximum sustainable employment and stable prices (price stability). 'Stable prices' is operationalized as a 2% inflation target on the PCE price index over the longer run. The dual mandate matters because it tells you what the Fed is reacting to: when inflation is above target it tilts hawkish (hikes/holds high), and when unemployment is rising and inflation is contained it tilts dovish (cuts). The two goals can conflict — e.g., stagflation (high inflation + rising unemployment) forces a trade-off — which is exactly when policy is hardest to predict. Note the Fed is independent of the fiscal/political branch, and its longer-run framework reviews how it weighs the two goals. The interview point: don't just say 'the Fed sets rates' — say WHY, in terms of inflation vs employment.