What is the Fed’s framework review process?

The short answer

The Fed framework review is a recurring public exercise in which the FOMC reassesses the foundational document that governs how it pursues its dual mandate of maximum employment and price stability. The Fed committed to conducting these reviews roughly every five years, with the first concluding in August 2020 and the second in August 2025.

The 2020 review responded to the long post-2008 period of low inflation and low rates by adopting flexible average inflation targeting (FAIT) — promising to allow inflation to run moderately above 2% after periods of undershooting — and committing to address employment “shortfalls” rather than “deviations.” Both shifts were intended to anchor expectations more firmly at the 2% target.

The 2025 review explicitly reversed both changes after the post-pandemic inflation surge revealed that the FAIT framework was poorly suited to high-inflation regimes. The Fed returned to flexible inflation targeting (FIT), removing both the “shortfalls” language and the average-inflation language.

→ New to monetary policy? Why does the Fed have a 2% inflation target?

What the data shows

Two completed reviews now span six years of formal framework evolution.

The empirical record (Federal Reserve documents, Brookings, AIER, 2019-2025):

• The first review ran from late 2019 to August 2020, with the revised Statement on Longer-Run Goals released August 27, 2020 at Jackson Hole
• The second review began January 2025 and concluded with revised Statement released August 22, 2025, also at Jackson Hole
• The 2020 framework introduced FAIT and the “shortfalls” approach; the 2025 framework removed both, returning to FIT and dropping both “shortfalls” and “deviations”
• The Fed has committed to a roughly five-year review cycle going forward, making the next review expected around 2030

The exception that nuances the framing: the 2025 framework did not return to a verbatim copy of the pre-2020 text; it incorporated lessons from the inflation surge while preserving some elements (like the broad-based maximum employment goal) introduced in 2020.

→ Dataset: US core CPI inflation dataset

Why it happens — the macro mechanism

The framework review process operates through three distinct channels of institutional learning.

Public consultation channel. Each review includes Fed Listens events, academic conferences (notably the Hutchins Center at Brookings and the Thomas Laubach Research Conference), and structured engagement with the broader economic community. This produces a documented record of which arguments influenced the final outcome — visible in the staff papers and speeches that accompany each review.

Self-correction channel — the rare institutional reversal. Contrary to the typical pattern of central banks defending past decisions, the 2025 review explicitly retracted the 2020 FAIT framework after the post-pandemic inflation surge proved that FAIT was poorly designed for the regime that followed. As Powell stated at Jackson Hole 2025, “the idea of an intentional, moderate inflation overshoot had proved irrelevant” — a remarkable concession from a sitting central bank chair.

This kind of explicit framework reversal is rare among major central banks and provides one of the cleanest case studies of institutional learning in modern monetary history.

Expectation-anchoring channel. The five-year cadence creates predictability about when frameworks may shift, which itself helps anchor expectations. Markets know that radical changes are reserved for review periods, while between reviews the framework is reaffirmed annually each January.

Synthesis by regime: under the original 2012-2020 FIT framework, monetary policy operated in a chronic low-inflation regime where overshooting was rarely a concern; under the 2020-2025 FAIT framework, the framework was tested almost immediately by a high-inflation regime for which it was poorly designed; under the post-2025 FIT 2.0 framework, monetary policy returns to a more symmetric approach explicitly informed by the 2020-2024 experience, with the dual mandate balanced more flexibly across regimes.

The 2025 framework review was a quiet act of institutional honesty: a central bank publicly admitting that the rules it wrote in 2020 were the wrong rules for the world that followed.

→ Framework: Central banks, monetary policy and market transmission

What it means for different economic actors

Savers. The framework review affects long-term inflation expectations, which in turn shape real returns on cash and bonds. The 2025 reversion to a more symmetric inflation approach (no longer promising deliberate overshooting) signals greater willingness to defend the 2% target from above, which historically supports real cash returns.

Investors. The framework determines how aggressively the Fed will respond to inflation surprises. Long-duration bonds and growth equities benefit when the framework tolerates inflation overshoots (as under FAIT); they suffer when the framework prioritizes preemptive tightening (as under the 2025 FIT). The shift in 2025 has implications for term premium and equity valuations.

Pension funds and insurers. Long-dated liabilities are particularly sensitive to inflation regime changes. The 2025 framework’s clearer commitment to symmetric 2% inflation provides a more stable discount rate environment than the asymmetric FAIT regime allowed.

A common error is to treat framework reviews as pure communication exercises. In practice, they have produced concrete shifts in policy reaction functions — the 2020 FAIT framework explicitly delayed the start of the 2022 hiking cycle, while the 2025 FIT framework would have prescribed earlier tightening.

Practical observation

Go deeper

Related questions

• Why did the Fed shift to FAIT?
• Why does the Fed have a 2% inflation target?
• How does the dot plot shape expectations?
• What is forward guidance?

Frequently asked questions

Why does the Fed conduct these reviews on a five-year cycle?

The five-year cadence was chosen deliberately to be long enough to allow meaningful evaluation of how the framework performed across at least one full economic cycle, but short enough to avoid letting frameworks become outdated. The pre-2020 statement had been reaffirmed annually for eight years (2012-2020) without substantive revision, which Fed officials judged was too long given the changing economic environment. The five-year norm is now standing practice and shapes academic and policy planning around the review timing.

How does the Fed framework compare to other central banks?

The ECB conducted its own strategic review concluding in 2021, adopting a symmetric 2% inflation target and clearer communication on climate considerations. The Bank of England has not adopted a comparable formal review process, instead operating under government-mandated remits that are reviewed by the Treasury. The Fed’s structured public review with academic engagement is the most formalized institutional learning process among major central banks, though the BIS and other forums encourage all central banks to conduct similar exercises periodically.

What might the next framework review (around 2030) consider?

Three issues are likely to feature prominently. First, the appropriate response to supply shocks, which both the 2020 and 2025 reviews acknowledged as inadequately addressed. Second, the role of balance sheet policy in the standing toolkit, given that QT has now been used as a regular instrument. Third, the question of whether to add a tolerance band around the 2% target — a recommendation that several Fed officials including Loretta Mester have proposed publicly. The 2030 review will likely also evaluate how the 2025 framework performed across whatever regime materializes between now and then.

Last updated — 19 May 2026