Fed Whisperer Warns: Fed Focuses on New Anti-Inflation Target, Room for Rate Cuts Has Nearly Vanished

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The US Federal Reserve (Fed) is facing the most significant policy framework transformation in decades — Congress is advancing the Price Stability Act (H.R. 5396), which seeks to abolish the Fed's "dual mandate" and have it focus solely on price stability, potentially significantly narrowing the room for rate cuts. Meanwhile, the New York Fed has officially ended quantitative tightening (QT) and pivoted toward re-injecting liquidity; the Fed's latest Survey of Household Economics and Decisionmaking (SHED) also shows that the public's dual anxieties over prices and employment are rising in tandem. (Background: Fed officials say "no rate hikes," but rate cuts require several months of favorable inflation data) (Context: The specter of stagflation returns! New York Fed President: US-Iran war drags down the economy, markets bet on "no rate cuts this year") The US House Financial Services Committee is reviewing a major bill that seeks to amend the Federal Reserve Act, abolishing the Fed's decades-long "dual mandate" and refocusing it solely on price stability. This proposal, titled the Price Stability Act (H.R. 5396), was introduced by Financial Services Committee Chairman French Hill in September 2025 and, if passed, would fundamentally rewrite the Fed's policy framework. According to a Wall Street Journal report on May 14, journalist Nick Timiraos, widely regarded as the "Fed's mouthpiece," noted that the bill's amendments are crystal clear — it revises Section 2A of the Federal Reserve Act by removing the dual-objective language of "maximum employment and stable prices," retaining only "stable prices." In his report, Timiraos raised a thought-provoking question: If this bill had become law last year (2025), would the Fed still have made the decision to cut rates? The Fed launched its rate-cut cycle in September 2025, when core inflation was still above the 2% target, but the job market had shown clear signs of cooling. If price stability becomes the sole policy objective, the weighting of the Fed's decision-making will undergo a fundamental shift — curbing inflation would overwhelmingly take priority over supporting employment. The bill is currently still in committee review, but it has already sparked widespread discussion on Wall Street and in academic circles. Supporters argue that a single mandate would help establish a more predictable monetary policy framework, preventing the Fed from oscillating between inflation and employment; opponents warn that abandoning the maximum employment mandate would leave vulnerable workers without policy protection during economic slowdowns. At the monetary policy operational level, the Fed has also undergone a major shift. According to the open market operations plan released by the New York Federal Reserve on May 14, the Fed will conduct approximately $10 billion in reserve management purchases (RMP) during the monthly period ending June 11, while simultaneously conducting approximately $16.3 billion in reinvestment purchases during the same period. The announcement of this operation scale reflects that the Fed completely ended its three-year quantitative tightening (QT) program by the end of 2025. During the balance sheet reduction cycle launched in 2022, the Fed once reduced its holdings by as much as $95 billion per month in Treasuries and mortgage-backed securities (MBS) to drain the abundant liquidity from the pandemic period. However, as money markets showed signs of stress in 2025, the Fed pivoted to purchasing short-term Treasury bills maturing within one year, re-injecting liquidity into the financial system. The policy reversal from "balance sheet drainage" to "bond-buying injection" shows that the Fed, while pursuing price stability, must also maintain flexibility in liquidity management to ensure the smooth operation of financial markets. The New York Fed's RMP purchase program is essentially a preventive operation aimed at lowering short-term funding costs by replenishing reserves in the financial system. The results of the Fed's annual Survey of Household Economics and Decisionmaking (SHED), released simultaneously on May 14, provide important socioeconomic context for the policy environment. The survey was conducted in October 2025 (before the outbreak of the Iran war), and the data show that American households' dual anxieties over prices and the job market are intensifying. The survey results show that approximately nine out of ten respondents expressed concern about rising prices, with affordability issues becoming a core pressure point in American society. At the same time, against the backdrop of near-stagnant job growth in 2025, 42% of adults said that "finding a job or keeping a job" caused varying degrees of concern, significantly higher than the 37% in 2024. Although the year-over-year price growth rate has retreated from its peak in the second half of 2025, the cumulative effects of inflation continue to erode household purchasing power, with the most significant impact on low- and middle-income groups. Analysts expect affordability to become an important political issue in the upcoming US midterm elections. The interweaving of three events — Congress advancing the Price Stability Act, the Fed pivoting from QT to bond-buying operations, and the public's dual anxieties over prices and employment — outlines the policy crossroads at which the Fed currently stands. If the Price Stability Act ultimately passes the legislative process, the Fed will face the most fundamental policy framework adjustment since the 1977 amendment to the Federal Reserve Act established the dual mandate. Under a single mandate, even if the job market cools significantly, the Fed may delay rate cuts to ensure price stability, which will reshape market expectations of the Fed's reaction function. However, given the partisan divisions on employment policy, whether the bill can pass the Senate remains unknown. For the foreseeable future, the Fed will have to continue walking a tightrope between price stability and employment support, and markets will closely watch every subtle change in each policy statement. 📍Related Reports📍

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