an interest rate forecasting model that suggests central banks should raise rates when inflation is above target or when gross domestic product (GDP) growth is too high and that they should lower rates when inflation is below target or GDP growth

The Taylor Rule is an interest rate forecasting model that suggests central banks should raise rates when inflation is above target or when gross domestic product (GDP) growth is too high and that they should lower rates when inflation is below target or GDP growth is too slow.

a mathematical formula developed by Stanford University economist John Taylor to help central banks set short-term interest rates based on economic conditions and inflation

The Taylor rule is a mathematical formula developed by Stanford University economist John Taylor to help central banks set short-term interest rates based on economic conditions and inflation.

a reduced form approximation of the responsiveness of the nominal interest rate

In 1993, John B Taylor formulated the idea of a Taylor rule, which is a reduced form approximation of the responsiveness of the nominal interest rate, as set by the central bank, to changes in inflation, output, or other economic conditions.

a policy rule for a central bank

A Taylor rule (discussed here) is a policy rule for a central bank that dictates how the central bank's interest rate target should be set in response to the inflation rate and the "output gap" (the deviation of real GDP from real GDP's desired level).

a formula that can automate how much to raise or lower interest rates to keep inflation steady

The Taylor Rule is a formula that can automate how much to raise or lower interest rates to keep inflation steady.

an interest rate forecasting model invented by famed economist John Taylor in 1992

The Taylor Rule is an interest rate forecasting model invented by famed economist John Taylor in 1992 and outlined in famed economist John Taylor's 1993 study, 'Discretion Versus Policy Rules in Practice.'

an interest rate forecasting model that helps guide how a central bank policy rate should respond to actual versus targeted levels of inflation and unemployment

The Taylor rule is an interest rate forecasting model that helps guide how a central bank policy rate should respond to actual versus targeted levels of inflation and unemployment; a forward-looking Taylor rule is one variation that emphasizes longer-term inflation forecasts and tends to imply a slower, more gradual tightening process.

a guideline for how central banks should alter interest rates in response to economic conditions

The Taylor Rule is a guideline for how central banks should alter interest rates in response to economic conditions.

in economics

In economics, a Taylor rule is a reduced form approximation of the responsiveness of the nominal interest rate, as set by the central bank, to changes in inflation, output, or other economic conditions.

a monetary policy rule under which the level of a benchmark policy interest rate is calculated based on a particular formula using, for example, the deviation of the observed inflation rate from the targeted inflation rate, and the output gap

The Taylor rule is a monetary policy rule under which the level of a benchmark policy interest rate is calculated based on a particular formula using, for example, the deviation of the observed inflation rate from the targeted inflation rate, and the output gap.

a formula developed by Stanford economist John Taylor

Taylor's rule is a formula developed by Stanford economist John Taylor.

an interest rate forecasting model that raises or lowers rates based on the "output gap" in the economy

The "Taylor Rule" is an interest rate forecasting model that raises or lowers rates based on the "output gap" in the economy.

a popular rule of thumb called the Taylor rule, which reduces the complexities in choosing the interest rate to a formula that incorporates the difference between the actual and targeted inflation rate and the difference between the actual and potential GDP

In deciding the policy rate, central bankers use a popular rule of thumb called the Taylor rule, which reduces the complexities in choosing the interest rate to a formula that incorporates the difference between the actual and targeted inflation rate and the difference between the actual and potential GDP.

a guide for setting interest rates

The Taylor rule is a guide for setting interest rates, taking into account different economic variables.

one mathematical formula that gets attention and is used by some to determine what the Fed Funds rate should be

The Taylor Rule is one mathematical formula that gets attention and is used by some to determine what the Fed Funds rate should be.

one simple method of inflation targeting

For example, one simple method of inflation targeting called the Taylor rule adjusts the interest rate in response to changes in the inflation rate and the output gap.