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Statement on Longer-Run Goals and Monetary Policy Strategy

Federal Reserve Board · 2025-08-22

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Statement on Longer-Run Goals and
Monetary Policy Strategy
Adopted effective January 24, 2012; as reaffirmed effective January 27, 2026

The Federal Open Market Committee (FOMC) is firmly committed to fulfilling its statutory mandate
from Congress of promoting maximum employment, stable prices, and moderate long-term interest
rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as
possible. Such clarity facilitates well-informed decisionmaking by households and businesses,
reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and
enhances transparency and accountability, which are essential in a democratic society.

The Committee’s monetary policy strategy is designed to promote maximum employment and stable
prices across a broad range of economic conditions. Employment, inflation, and long-term interest
rates fluctuate over time in response to economic and financial disturbances. Monetary policy plays
an important role in stabilizing the economy in response to these disturbances. The Committee’s
primary means of adjusting the stance of monetary policy is through changes in the target range for
the federal funds rate. The Committee is prepared to use its full range of tools to achieve its
maximum employment and price stability goals, particularly if the federal funds rate is constrained by
its effective lower bound.

Durably achieving maximum employment fosters broad-based economic opportunities and benefits for
all Americans. The Committee views maximum employment as the highest level of employment that
can be achieved on a sustained basis in a context of price stability. The maximum level of
employment is not directly measurable and changes over time owing largely to nonmonetary factors
that affect the structure and dynamics of the labor market. Consequently, it would not be appropriate
to specify a fixed goal for employment; rather, the Committee’s policy decisions must be informed by
assessments of the maximum level of employment, recognizing that such assessments are
necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in
making these assessments.

Price stability is essential for a sound and stable economy and supports the well-being of all
Americans. The inflation rate over the longer run is primarily determined by monetary policy, and
hence the Committee can specify a longer-run goal for inflation. The Committee reaffirms its judgment
that inflation at the rate of 2 percent, as measured by the annual change in the price index for
personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s
statutory maximum employment and price stability mandates. The Committee judges that longer-term

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Statement on Longer Run Goals and Monetary Policy Strategy 2

inflation expectations that are well anchored at 2 percent foster price stability and moderate long-term
interest rates and enhance the Committee’s ability to promote maximum employment in the face of
significant economic disturbances. The Committee is prepared to act forcefully to ensure that longer-
term inflation expectations remain well anchored.

Monetary policy actions tend to influence economic activity, employment, and prices with a lag.
Moreover, sustainably achieving maximum employment and price stability depends on a stable
financial system. Therefore, the Committee’s policy decisions reflect its longer-run goals, its medium-
term outlook, and its assessments of the balance of risks, including risks to the financial system that
could impede the attainment of the Committee’s goals.

The Committee’s employment and inflation objectives are generally complementary. However, if the
Committee judges that the objectives are not complementary, it follows a balanced approach in
promoting them, taking into account the extent of departures from its goals and the potentially
different time horizons over which employment and inflation are projected to return to levels judged
consistent with its mandate. The Committee recognizes that employment may at times run above
real-time assessments of maximum employment without necessarily creating risks to price stability.

The Committee intends to review these principles and to make adjustments as appropriate at its
annual organizational meeting each January, and to undertake roughly every 5 years a thorough public
review of its monetary policy strategy, tools, and communication practices.