Q&As
What was the focus of the Federal Reserve's framework review?
Has the Federal Reserve's inflation objective changed?
How has the review altered how the Federal Reserve will pursue its maximum-employment objective?
Does the Federal Reserve intend to conduct reviews of its policy strategy in the future?
What was the focus of the Federal Reserve's framework review?
The Federal Reserve's monetary policy framework review focused on the Federal Open Market Committee's (FOMC) Statement on Longer-Run Goals and Monetary Policy Strategy, which articulates the Committee's approach to monetary policy, and the Committee's policy communications tools.
Why is the Statement on Longer-Run Goals and Monetary Policy Strategy important, and why was it revised?
The Statement on Longer-Run Goals and Monetary Policy Strategy explains how the FOMC pursues its congressionally mandated objectives of maximum employment and stable prices for the benefit and well-being of all Americans. The statement articulates the Committee's approach to monetary policy and serves as the foundation for its policy actions. It is designed to give the public a clear understanding of how the Committee thinks about monetary policy. That understanding is important for transparency, accountability, and the effectiveness of monetary policy. The newly revised statement shares many core elements with the previous statement, which was revised at the conclusion of the last framework review in 2020 and evolved in turn from the first statement issued in 2012. The changes in the new statement reflect the evolution of the economy over the past five years.
How did the evolution of the economy over the past five years inform the new Statement on Longer-Run Goals and Monetary Policy Strategy?
The period leading up to the 2019–20 review was characterized by low growth and low inflation, with the general level of interest rates both in the U.S. and around the world running close to their effective lower bound. In that economic environment, it appeared that the FOMC had less room to cut the policy interest rate when needed to support the economy. By contrast, the past five years have been characterized by higher levels of inflation and higher interest rates than in the preceding decade. These developments reinforced the importance of the FOMC's monetary policy strategy being well suited to a broad range of economic conditions, which is reflected in the new statement.
Besides changing the level of the federal funds rate, what other tools does the Federal Reserve have to achieve its maximum-employment and price-stability objectives?
Adjustments in the federal funds rate are the primary means for altering the stance of monetary policy in response to changing economic circumstances. The Committee may deploy other tools as necessary to foster its objectives, including forward guidance about future settings of the federal funds rate and balance sheet policies. The Federal Reserve is committed to using its full range of tools to support the U.S. economy as necessary and will do all it can to achieve its maximum-employment and price-stability goals.
Has the Federal Reserve's inflation objective changed?
No. The Federal Reserve's longer-run inflation objective remains 2 percent and was not a focus of the most recent framework review. The revised Statement on Longer-Run Goals and Monetary Policy Strategy continues to reflect the view that well-anchored inflation expectations at 2 percent are critically important for the achievement of the Federal Reserve's objectives. Well-anchored inflation expectations promote the return of inflation to 2 percent following periods of high or low inflation, foster moderate long-term interest rates, and allow monetary policy to pursue maximum employment in economic downturns without compromising price stability. The revised statement emphasizes the FOMC's commitment to act forcefully to keep inflation expectations well anchored at 2 percent.
How has the review altered how the Federal Reserve will pursue its maximum-employment objective?
The revised Statement on Longer-Run Goals and Monetary Policy Strategy describes maximum employment as the "highest level of employment that can be achieved on a sustained basis in a context of price stability." It emphasizes that "durably achieving maximum employment fosters broad-based economic opportunities and benefits for all Americans" and notes the FOMC's recognition that "employment may at times run above real-time assessments of maximum employment without necessarily creating risks to price stability."
How do the changes to the Statement on Longer-Run Goals and Monetary Policy Strategy affect the way that monetary policy is conducted?
The revisions to the Statement on Longer-Run Goals and Monetary Policy Strategy are in many ways consistent with the Federal Reserve's approach to conducting monetary policy in recent years to foster maximum employment and price stability, and there is continuity with previous statements. The revised statement clarifies that when the maximum-employment and price-stability objectives are not complementary—for example, when unemployment and inflation are both high—the Committee "follows a balanced approach in promoting them." This balanced approach takes into account the extent of departures from the maximum-employment and price-stability objectives and the time horizons over which those departures are projected to persist.
What role did perspectives from outside of the Federal Reserve System play in the Federal Reserve's framework review?
A key component of the review was the continuation of the Fed Listens initiative. This initiative, which began as part of the 2019–20 review, involves events that allow policymakers to hear from a broad range of stakeholders in the U.S. economy. In 2025, at 10 Fed Listens events at Reserve Banks around the country, policymakers heard from a wide range of organizations, including workforce development organizations and community colleges, retirees, union members, small business owners, residents of low- and moderate-income communities, and others. Through these events, policymakers were able to engage directly with a wide range of individuals and groups on issues pertaining to the Federal Reserve's dual-mandate goals of maximum employment and stable prices and were able to gather feedback from the public. Another key component of the review was the Second Thomas Laubach Research Conference, hosted by the Federal Reserve Board on May 15–16, 2025. The conference provided timely academic and practitioner perspectives from outside the Federal Reserve System on a range of issues related to the monetary policy framework.
Does the Federal Reserve intend to conduct reviews of its policy strategy in the future?
Yes. The Statement on Longer-Run Goals and Monetary Policy Strategy indicates that the Federal Reserve intends to conduct public reviews of its monetary policy strategy, tools, and communication practices roughly every five years.