Hence, the long-term goal of the Fed is to keep prices stable by some definition, avoiding either inflation or deflation. But the Federal Reserve has a dual mandate--to achieve not only price stability but also the maximum sustainable rate of employment. Fortunately, under most economic circumstances, both objectives should be realizable.
If prices are stable in the long term, employment should grow along something like a full-employment path. And, as with fiscal policy, if the long-term anchor is holding, the Fed should have the added ability to respond to short-term fluctuations in employment by raising or lowering interest rates without exciting market fears about inflation or deflation.