The Use of Policy Rules in Monetary Policy Analysis

In our analysis of current Federal Reserve policy, the SOMC makes use of some explicit numerical rules, including the justly famous Taylor rule, for the conduct of monetary policy. The purpose of this paper is to discuss the way in which we do this, pointing out several issues concerning crucial details. In addition, the logic of the Taylor rule, as well as a base money rule promoted in my own work (e.g., McCallum, 1988), will be outlined and a different way of using the rules will be briefly mentioned. Finally, I will provide a bit of commentary on current conditions.