Bradley Distinguished Lecture Series (Webinar): It’s Time to Get Back to Rules-Based Monetary Policy

Featuring:
John B. Taylor, Mary and Robert Raymond Professor of Economics, Stanford University; George P. Shultz Senior Fellow in Economics, Hoover Institution; and Senior Fellow, Stanford Institute for Economic Policy Research.

In the years leading up to 2020, the Federal Reserve was moving toward a rules-based monetary policy with favorable comments from many, including from Fed chair Jerome Powell, who said “I find these rule prescriptions helpful.” But that move was interrupted when the pandemic hit: The Fed cut the federal funds rate to zero. The Fed’s balance sheet and money growth exploded. And the Fed stopped reporting about monetary policy rules in its Monetary Policy Report.

Despite calls to return to a rules-based policy in the past year, the Fed moved little, and it got further and further behind the curve. As a result, inflation rose to levels not seen since the 1970s. Eventually, the Fed began to adjust to the higher inflation, but much less than implied by monetary policy rules which worked well in the past. The question going forward is how and when the Fed should get back to rules-based monetary policy.

This lecture explores the options, recognizing that COVID and military conflicts have big effects on the economy and measures of inflation. The conclusion is that, even taking account of today’s special circumstances, a return to rules-based policy is more important now than ever, and that it has become a global issue, not only one for the Fed alone. Dr. Taylor will also outline his thoughts on fiscal and regulatory policies that will help put the U.S. on a solid path to long-term economic prosperity. Read more…

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