The US Federal Reserve has presumably been operating under a dual mandate of price stability and maximum employment. However, according to President Donald Trump’s pick for the Fed board Stephen Miran, there is a “third mandate” that spells doom for the greenback and good times for crypto.
The third mandate comes from the Federal Reserve Act, buried deep in the central bank’s founding documents. It states that the Fed’s objectives include maximum employment, price stability, and “moderate long-term interest rates.”
For decades, decisions have been made after the US central bank assesses the first two goals, while the third was treated more as a byproduct of inflation management than a standalone directive.
According to Bloomberg’s Tuesday report, officials are thinking about adding the clause as justification for stronger intervention in bond markets. Economists believe policy changes could control the yield curve or expand quantitative easing, affecting large-scale bond purchases and sustained money creation.
Miran’s confirmation of the third mandate
US bond yields across maturities have been trending toward their lowest levels of the year as a weakening labor market builds the case for fresh rate cuts. The Federal Reserve is expected to announce another quarter-point reduction later Wednesday, with markets pricing in more than 60 basis points of easing by year-end. Inflation is still above the central bank’s 2% target.
In recent years, the third mandate was dismissed as a “natural consequence” of keeping inflation in check. Going by the market’s expectation of borrowing rate cuts, the Fed could revive the option, which could bring down the dollar’s value, according to economists.
“With Fed board member Miran now confirmed, the MSM is preparing the world for the Fed’s ‘third mandate’ which is essentially yield curve control. LFG! YCC -> $BTC = $1m,” BitMEX co-founder Arthur Hayes wrote on X Tuesday.
Still, Jim Brenner, vice chairman at Natalliance Securities LLC, wrote in a September 5 note to investors that the administration had rediscovered a clause “not well defined” that could grant the Fed stronger influence over long-term rates.
“This is not today’s trade, but certainly something to think about,” Brenner surmised.
The biggest winners when the third mandate comes into play are pension funds and insurance companies, who could avoid catastrophic losses when suppressed yields stabilize balance sheets.
Risk assets, including crypto, could see hiked inflows from investors seeking yields outside the bond market. Bitcoin is being touted by advocates as a benchmark asset outside government control, and could likely see another all-time high record before the 2025 curtains draw.
Third mandate is a financial repression on its own
Christian Pusateri, founder of encryption protocol Mind Network, coined the prospect as “financial repression by another name.”
Speaking to Bloomberg on Wednesday, he insisted the policy “looks a lot like yield curve control” and warned that “the price of money is coming under tighter control because the age-old balance between capital and labor, between debt and GDP, has become unstable.”
Pusateri added that Bitcoin will most likely absorb capital fleeing from traditional financial instruments. “Bitcoin stands to absorb massive capital as the preferred hedge against the global financial system,” he said.
The dollar index slipped to around 96.7 on Wednesday, its lowest level in two and a half months. DXY is down about 1% for the week as traders brace for the central bank’s policy announcement later on today.
One question that remains unanswered is what would prompt the Fed and Treasury to invoke the third mandate in practice. George Catrambone, head of fixed income at DWS Americas, mentioned a scenario where it would be a sustained elevation of long-term yields even as the Fed delivers several rate cuts.
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