A “third mandate” from the US Federal Reserve could alter long-term monetary policy if implemented, potentially posing challenges for the dollar while benefiting cryptocurrencies.
The Fed has traditionally maintained a dual mandate — focusing on price stability and maximum employment — but Stephen Miran, appointed by President Donald Trump as Fed governor, referred to a “third mandate” this month, igniting discussions about the central bank’s future monetary approach.
This third mandate, found in the Fed’s founding documents, indicates that the central bank actually has three objectives: maximum employment, price stability, and moderate long-term interest rates.
The Trump administration seems poised to leverage this overlooked statutory requirement as a basis for more assertive intervention in bond markets, potentially via yield curve control or expanded quantitative easing and money printing, as reported by Bloomberg on Tuesday.
Lowering long-term interest rates
This third goal has largely been overlooked for years, as many believe it naturally results from fulfilling the first two. However, Trump officials are now invoking it as legal justification for potential yield curve control measures, where the Fed purchases government bonds to achieve a specific interest rate target.
Trump has consistently pushed for lower rates, criticizing Fed governor Jerome Powell for being “too slow” or “too late” in making reductions.
Related: Crypto markets brace for Fed rate adjustment amid changes in governance
The administration aims to actively suppress long-term interest rates, considering tools such as increased Treasury bill issuance, bond buybacks, quantitative easing, or direct yield curve control.
Lowering long-term rates could decrease government borrowing expenses as national debt reaches a record $37.5 trillion. Additionally, the administration seeks to invigorate housing markets by reducing mortgage rates.
Positive impact on crypto
Christian Pusateri, founder of the encryption protocol Mind Network, stated on Wednesday that the third mandate represents “financial repression under a different guise,” noting that it “mirrors” yield curve control.
“The pricing of capital is coming under tighter regulation as the historical equilibrium between capital and labor, and between debt and GDP, has become erratic,” he asserted.
“Bitcoin stands to attract significant capital as the preferred safeguard against the global financial framework.”
Arthur Hayes, the outspoken founder of BitMEX, echoed that this development is positive for crypto, suggesting that yield curve control could propel Bitcoin to $1 million.
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