The Federal Reserve on Thursday rolled out a sweeping rewrite of its approach to monetary policy, putting new weight on bolstering the US labour market and less on worries about too-high inflation.

The Fed’s new monetary policy strategy, unveiled at the start of an annual central banking conference, pledges to address “shortfalls” from the “broad-based and inclusive goal” of full employment, a nod to racial equity and its role in promoting economic growth.

The US central bank also promises to seek to achieve inflation that averages 2 per cent over time, offsetting periods when it is running below that level with periods when it is moderately higher.

The change suggests the Fed’s key overnight interest rate, already near zero, will stay there for potentially years to come as policymakers woo higher inflation.

The policy shift is arguably the biggest for the Fed since Paul Volcker remade the central bank into an inflation-slaying force four decades ago, when prices were spiraling higher.

Fed Chair Jerome Powell’s new policy blueprint, designed for a world where weak inflation, low interest rates, and slow economic growth appear to be here to stay, puts the labour market front and center.

The changes acknowledge that “downward risks to employment and inflation have increased”. All 17 Fed policymakers signed on to the new strategy.