Why does the Federal Reserve aim for inflation of 2 percent over the longer run?
In its Statement on Longer-Run Goals and Monetary Policy Strategy (PDF), the Federal Open Market Committee (FOMC) judges that inflation of 2 percent over the longer run, as measured by the annual change in the price index for personal consumption expenditures, is most consistent with the Federal Reserve's mandate for maximum employment and price stability. When households and businesses can reasonably expect inflation to remain low and stable, they are able to make sound decisions regarding saving, borrowing, and investment, which contribute to a well-functioning economy and the well-being of all Americans.
Related Information
FOMC economic projections FAQs
Monetary Policy Report to the Congress
Related Questions
What is inflation, and how does the Federal Reserve evaluate changes in the rate of inflation?