Statement on Longer-Run Goals and Monetary Policy …

1 Statement on Longer-Run Goals and Monetary Policy Strategy Adopted effective January 24, 2012; as amended effective January 30, 2018. The Federal Open Market Committee economic disturbances. The maximum level of (FOMC) is firmly committed to fulfilling its employment is largely determined by nonmon- statutory mandate from the Congress of pro- etary factors that affect the structure and dy- moting maximum employment, stable prices, namics of the labor market. These factors may and moderate long-term interest rates.

2 The change over time and may not be directly meas- Committee seeks to explain its Monetary Policy urable. Consequently, it would not be appro- decisions to the public as clearly as possible. priate to specify a fixed goal for employment;. Such clarity facilitates well-informed deci- rather, the Committee's Policy decisions must sionmaking by households and businesses, re- be informed by assessments of the maximum duces economic and financial uncertainty, in- level of employment, recognizing that such as- creases the effectiveness of Monetary Policy , sessments are necessarily uncertain and subject and enhances transparency and accountability, to revision.

3 The Committee considers a wide which are essential in a democratic society. range of indicators in making these assess- Inflation, employment, and long-term inter- ments. Information about Committee partici- est rates fluctuate over time in response to eco- pants' estimates of the Longer-Run normal rates nomic and financial disturbances. Moreover, of output growth and unemployment is pub- Monetary Policy actions tend to influence eco- lished four times per year in the FOMC's Sum- nomic activity and prices with a lag.

4 Therefore, mary of Economic Projections. For example, the Committee's Policy decisions reflect its in the most recent projections, the median of Longer-Run Goals , its medium-term outlook, and FOMC participants' estimates of the longer - its assessments of the balance of risks, includ- run normal rate of unemployment was per- ing risks to the financial system that could im- cent. pede the attainment of the Committee's Goals . In setting Monetary Policy , the Committee The inflation rate over the longer run is pri- seeks to mitigate deviations of inflation from marily determined by Monetary Policy , and its Longer-Run goal and deviations of employ- hence the Committee has the ability to specify ment from the Committee's assessments of its a Longer-Run goal for inflation.

5 The Committee maximum level. These objectives are gener- reaffirms its judgment that inflation at the rate ally complementary. However, under circum- of 2 percent, as measured by the annual change stances in which the Committee judges that the in the price index for personal consumption ex- objectives are not complementary, it follows a penditures, is most consistent over the longer balanced approach in promoting them, taking run with the Federal Reserve's statutory man- into account the magnitude of the deviations date.

6 The Committee would be concerned if and the potentially different time horizons over inflation were running persistently above or be- which employment and inflation are projected low this objective. Communicating this sym- to return to levels judged consistent with its metric inflation goal clearly to the public helps mandate. keep longer -term inflation expectations firmly The Committee intends to reaffirm these anchored, thereby fostering price stability and principles and to make adjustments as appro- moderate long-term interest rates and enhanc- priate at its annual organizational meeting each ing the Committee's ability to promote maxi- January.

7 Mum employment in the face of significant 1.