What is the Taylor Rule?

The Taylor Rule is a guideline for setting short-term interest rates based on inflation and economic output. It helps estimate whether current central bank policy is too loose (dovish) or too tight (hawkish) relative to economic fundamentals.

• r*: Neutral rate (~2%)
• π: Inflation (PCE YoY)
• y_gap: Output gap (GDP vs potential)
• GDPNow projects current quarter growth in real time.

We calculate both a historical Taylor Rule estimate and a forward-looking estimate using the latest GDPNow figures.

Taylor Rule Dashboard