Taylor’s rate is making a comeback
An old-school, oft dismissed guide for interest rates has spiked dramatically, suggesting the Fed needs to raise rates without mercy.
The Taylor rule is an equation John Taylor, a professor of economics at Stanford University, developed in 1993 that prescribes a value for the Federal funds rate based on the level of inflation and economic slack. Different versions of this rule using other measures for inflation and economic slack, such as the labour underutilisation rate or real GDP g…