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Simple Monetary Policy Rules

Announcement

  • In May 2020, the Congressional Budget Office (CBO) published selected 2-year and 10-year economic projections that did not include all of the series we use to update our simple monetary policy rules. As a result, the policy rules that rely on the CBO’s forecasts for the output gap have been omitted from the 2020:Q2 update.
  • Description: We show federal funds rates from 7 simple monetary policy rules based on 3 sets of forecasts for economic conditions.
  • Why so many rules? Examining a variety of rules is helpful because there is no agreement on a single “best” rule, and different rules can sometimes generate very different values for the federal funds rate, both for the present and for the future.
  • Why 3 forecasts? Looking across multiple economic forecasts helps to capture some of the uncertainty surrounding the economic outlook and, by extension, the outlook for monetary policy.
  • Download our spreadsheet to customize your own rule and see all the forecasts, rules, and funds rate paths.

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Federal Funds Rates Based on Simple Monetary Policy Rules for a Given Forecast

Forecast Rule Date (YYYY.Q format)
SPF Taylor (1993) rule
Core inflation in Taylor (1999) rule
Inertial rule
Alternative r* rule
Forward-looking rule
First-difference rule
Low weight on output gap rule
CBO Taylor (1993) rule
Core inflation in Taylor (1999) rule
Inertial rule
Alternative r* rule
Forward-looking rule
First-difference rule
Low weight on output gap rule
FRBC BVAR Taylor (1993) rule
Core inflation in Taylor (1999) rule
Inertial rule
Alternative r* rule
Forward-looking rule
First-difference rule
Low weight on output gap rule
Summary Maximum
Median
Minimum