Last March, I quoted Federal Reserve Chair Jerome Powell on this Economics One blog post https://economicsone.com/2022/03/03/well-have-it-in-the-next-one-well-bring-them-back-for-the-july-said-chair-powell-at-the-house-yesterday-and-at-the-senate-today/ from his March 2 and March 3 testimony at the House and Senate that “WE’LL HAVE IT IN THE NEXT ONE.” He was responding to questions at hearings of the House Financial Services Committee on March 2 and of the Senate Banking Committee on March 3, about why he and the Federal Reserve Board omitted the section on monetary policy rules in the just released February 2022 Monetary Policy Report.
Well, he was true to his word. The Monetary Policy Report released today has put the section on policy rules, including the Taylor rule as number one on the list, back in. It has statements that: “Simple monetary policy rules, which relate a policy interest rate to a small number of other economic variables, can provide useful guidance to policymakers.” And that “simple monetary policy rule considered here call for raising the target range for the federal funds rate significantly.”
On May 6 we had our annual monetary policy conference at Hoover and Stanford entitled “How Monetary Policy Got behind the Curve and How to Get Back” Well, we are beginning to see part of the how. With rules back in the Report, we are starting to see how the Fed will adjust policy and “How to Get Back.’