The Taylor Rule: A Guidepost for Monetary Policy?
Once a topic to be found only in scholarly economic journals, the Taylor rule is popping up regularly in news magazines, finance journals, and central bankers’ speeches. Does the Fed follow the rule? Should it? This Commentary explains what the Taylor rule is, discusses why it seems to describe Fed interest-rate setting, and argues that the rule is most valuable as a guideline rather than a prescription.
The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit clevelandfed.org for updates.