Asymmetries in federal reserve objectives.

This article analyzes the objectives of U.S. monetary policymakers using data from the Federal Open Market Committee's (FOMC) Summary of Economic Projections (SEP), focusing on inflation and unemployment outcomes. It finds that policymakers' preferences deviate from the conventional quadratic loss function by incorporating asymmetric costs and benefits—specifically, extra costs from overshooting and benefits from undershooting their long-run inflation and unemployment targets. The study categorizes policymakers' projections into five types (purple, blue, green, orange, red), each reflecting different skewness in objectives toward inflation or unemployment. Empirical evidence shows that during the Bernanke Fed (2009–2013), objectives were skewed downward with respect to inflation, while during the Yellen Fed (2014–2017), they were skewed downward with respect to unemployment; the Powell Fed (2018–2022) exhibited a mix of these considerations. These findings highlight the importance of accounting for non-quadratic preferences in understanding U.S. monetary policy decisions.