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Statement on Longer-Run Goals and Monetary Policy Strategy
Adopted effective January 24, 2012; as reaffirmed effective January 30, 2024
The Federal Open Market Committee (FOMC)
is firmly committed to fulfilling its statutory
mandate from the 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.

Committee has the ability to 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 mandate. The Committee
judges that longer-term 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. In order to anchor
longer-term inflation expectations at this level,
the Committee seeks to achieve inflation that averages 2 percent over time, and therefore judges
that, following periods when inflation has been
running persistently below 2 percent, appropriate
monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.

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 judges that the level of the federal
funds rate consistent with maximum employment and price stability over the longer run has
declined relative to its historical average. Therefore, the federal funds rate is likely to be constrained by its effective lower bound more frequently than in the past. Owing in part to the
proximity of interest rates to the effective lower
bound, the Committee judges that downward
risks to employment and inflation have increased. The Committee is prepared to use its
full range of tools to achieve its maximum employment and price stability goals.

Monetary policy actions tend to influence economic activity, employment, and prices with a
lag. In setting monetary policy, the Committee
seeks over time to mitigate shortfalls of employment from the Committee’s assessment of its
maximum level and deviations of inflation from
its longer-run goal. 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 maximum level of employment is a broadbased and inclusive goal that 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 shortfalls of employment from its maximum
level, recognizing that such assessments are necessarily uncertain and subject to revision. The
Committee considers a wide range of indicators
in making these assessments.

The Committee’s employment and inflation
objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it takes into account the employment shortfalls and inflation deviations and the potentially
different time horizons over which employment
and inflation are projected to return to levels
judged consistent with its mandate.
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.

The inflation rate over the longer run is primarily determined by monetary policy, and hence the

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