Fed reaffirms 2% inflation target and long-term policy framework

The Federal Open Market Committee (FOMC) reaffirmed its monetary policy framework on January 27, 2026, maintaining its long-term inflation target of 2%, as measured by the annual change in the personal consumption expenditures price index.

The framework, originally adopted on January 24, 2012, outlines the Committee's approach to fulfilling its congressional mandate of promoting maximum employment, stable prices, and moderate long-term interest rates.

The FOMC's primary tool for adjusting monetary policy remains changes to the target range for the federal funds rate. The Committee stated it is prepared to use its full range of tools to meet its goals, particularly if the federal funds rate is constrained by its effective lower bound.

The Committee does not set a fixed numerical target for employment, noting that the maximum level of employment is not directly measurable and shifts over time due largely to nonmonetary factors affecting labor market structure and dynamics.

The FOMC acknowledged that monetary policy actions influence economic activity, employment, and prices with a lag, and that its decisions reflect longer-run goals, medium-term outlook, and assessments of risks, including risks to the financial system.

The Committee stated it intends to review its principles annually each January and conduct a broader public review of its monetary policy strategy, tools, and communication practices approximately every five years.

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