The labor market must reach “levels consistent with the Committee’s assessments of maximum employment.” Inflation would need to rise to 2 percent, and, in addition, the Committee would need to assess that inflation is on track to moderately exceed 2 percent for some time.
The new FAIT framework is implemented not only through these outcome-based conditions for the liftoff of the policy rate, but also through the commitment that monetary policy will remain accommodative after liftoff for some time in order to achieve “inflation moderately above 2 percent for some time so that inflation averages 2 percent over time,” consistent with longer-term inflation expectations anchored at 2 percent.