Jan 21, 2020

Coretta Scott King and the Fed's full employment mandate

Activist Coretta Scott King addresses the 1988 Democratic National Convention in Atlanta. Photo: Wally McNamee/Corbis via Getty Images

Coretta Scott King played an integral role in establishing the Fed's dual mandate of stable prices and maximum employment.

Why it matters: Most central banks have only a singular objective — maintaining price stability, or keeping inflation in check. The Fed, however, has two and that is thanks in no small part to King.

Details: "King played a pivotal, but not widely recognized, role in advocating for full employment," a policy paper from the Center for Economic and Policy Research notes.

  • "As a founder of the National Committee for Full Employment/Full Employment Action Council, King joined Congressional leaders Augustus Hawkins and Hubert Humphrey in calling for and eventually passing the landmark 1978 Full Employment and Balanced Growth Act (Humphrey-Hawkins Act)."

What it means: The Humphrey-Hawkins Act "clarified the role that monetary policy can play in improving the employment picture and required the Fed to weigh the impact that its interest rate policy would have on the job market."

  • It legally required the Fed to pursue maximum employment.

The bottom line: Former AP reporter Errin Haines points out that Martin Luther King Jr. Day "is Mrs. King’s as much as it is Dr. King’s, because she demanded that the country that disrespected her husband in life would respect him in death, year after year, until it became a reality."

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In photos: U.S. honors Martin Luther King

Dr. Martin Luther King, Jr.'s son, Martin Luther King III, his wife, Arndrea Waters King, and their daughter Yolanda Renee King visit the Martin Luther King Jr. Memorial on Martin Luther King Jr. Day on Monday. Photo: Sarah Silbiger/Getty Images

Democratic presidential candidates set aside their differences ahead of next month's Iowa caucus to march arm-in-arm in honor of the Rev. Martin Luther King Jr. Monday.

The big picture: Sens. Bernie Sanders and Elizabeth Warren clashed at last week's Democratic debate in Iowa. But in South Carolina, they linked arms and joined other candidates in singing "We Shall Overcome," the New York Times reports. In Washington, D.C., members of King's family and President Trump were among those commemorating the civil rights icon on Martin Luther King Jr. Day at his memorial.

See photosArrowJan 21, 2020

The market is expecting multiple rate cuts in 2020

Data: CME Group; Note: Chart does not include expectations below 5% for a rate hike in 2020; Chart: Andrew Witherspoon/Axios

Just four days into February, traders have thrown out the Fed's guidance that it will remain on the sidelines in 2020, and lined up bets for multiple U.S. interest-rate cuts.

What's happening: Fed fund futures prices show that as the coronavirus outbreak has worsened, expectations are rising that the Fed will take action, as policymakers did last year when the U.S.-China trade war began to ravage the manufacturing, trade and transportation industries.

Judy Shelton vs. Fed independence

Illustration: Aïda Amer/Axios

President Trump hasn't given up on his dream of politicizing the Fed. After failing to get Herman Cain and Stephen Moore onto the Fed's board of governors, his latest candidate is one of his former campaign advisers, Judy Shelton, who testified in front of the Senate Banking Committee today.

Why it matters: Shelton is no more qualified to sit on the Fed board than Cain or Moore. But she's already further along in the process than either of them ever managed.