Fed’s Third Mandate Could Shift Monetary Policy and Impact Dollar and Crypto
The US Federal Reserve has traditionally operated under a dual mandate: ensuring price stability and maximizing employment. However, a lesser-known statutory requirement—the so-called “third mandate”—calls for moderating long-term interest rates. This mandate, embedded in the Federal Reserve Act of 1913, has largely been overlooked until recently.
Stephen Miran, appointed by former President Donald Trump as a Fed governor, brought renewed attention to this third mandate earlier this month. Miran’s emphasis has sparked speculation that the Fed might adopt more aggressive monetary policies, such as yield curve control, to actively manage long-term interest rates.
Background on the Third Mandate and Policy Implications
While price stability and maximum employment have been the Fed’s primary goals, the third mandate requires the central bank to moderate long-term interest rates. Historically, this objective was seen as a natural consequence of achieving the other two goals, but the Trump administration appears ready to invoke it explicitly as legal justification for expanded intervention in bond markets.
Potential tools include increased Treasury bill issuance, bond buybacks, quantitative easing, or direct yield curve control, where the Fed targets specific interest rates by purchasing government bonds. These measures aim to lower long-term borrowing costs, which is particularly relevant as the US national debt recently surpassed $37.5 trillion.
Lower mortgage rates could also stimulate the housing market, a key focus for the administration. Trump has previously criticized Fed Chair Jerome Powell for not lowering rates quickly enough, underscoring the administration’s preference for more accommodative monetary policy.
Potential Market Impact and Crypto Outlook
Industry experts view the renewed focus on the third mandate as a form of financial repression, effectively tightening control over the cost of capital. Christian Pusateri, founder of the encryption protocol Mind Network, described the policy shift as “financial repression by another name,” likening it to yield curve control.
According to Pusateri, the imbalance between capital and labor, as well as debt relative to GDP, necessitates such measures. In this environment, Bitcoin could become a preferred hedge against systemic financial risks, potentially attracting significant capital inflows.
Arthur Hayes, co-founder of BitMEX, echoed this bullish sentiment, suggesting that yield curve control policies could dramatically increase Bitcoin’s value, potentially pushing it toward $1 million. While such forecasts are speculative, they highlight the perceived link between Fed policy shifts and cryptocurrency market dynamics.
Conclusion
The Federal Reserve’s third mandate to moderate long-term interest rates is gaining renewed attention as a basis for more aggressive monetary interventions. These policies could weaken the US dollar by increasing money supply and suppressing yields, while simultaneously boosting demand for cryptocurrencies like Bitcoin as alternative stores of value. Market participants will closely watch forthcoming Fed actions and their broader economic implications.
FinOracleAI — Market View
The potential activation of the Fed’s third mandate and adoption of yield curve control represent a significant shift toward more accommodative monetary policy. This is likely to exert downward pressure on the US dollar as long-term rates remain suppressed, increasing inflation risks. Cryptocurrencies, particularly Bitcoin, may benefit as investors seek hedges against currency debasement and systemic risk.
However, the extent and timing of these policies remain uncertain, posing risks of market volatility. Investors should monitor Fed communications and bond market responses closely for clearer signals.
Impact: positive
