Taylor's Rule and the Federal Reserve Bank Monetary Policy

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This Web page, part of the Federal Reserve Bank of San Francisco Web site, discusses the effect of the Taylor's rule formula on Federal Reserve monetary policy. Taylor's rule is a formula developed by Stanford economist John Taylor. It was designed to provide "recommendations" for how a central bank like the Federal Reserve should set short-term interest rates as economic conditions change. These rates are altered to achieve both the bank's short-run goal for stabilizing the economy and its long-run goal for inflation. The Federal Reserve Bank of San Francisco is one of twelve regional Reserve Banks in the Federal Reserve System. Also known as the Fed, the Federal Reserve is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Less

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