Modernizing Monetary Policy Rules
October 18-19, 2018
Federal Reserve Bank of St. Louis President and CEO James Bullard spoke Thursday morning, Oct. 18, to the Economic Club of Memphis. A participant on the Federal Open Market Committee, Bullard focused his presentation on modernizing monetary policy rules. About 150 business and community leaders, as well as economists, attended the event, held on the campus of the University of Memphis.
During his talk, Bullard discussed modernizing a popular monetary policy rule, a version of the Taylor rule, whose construction was based on U.S. data from the 1980s and 1990s. Since then, he noted, three important macroeconomic developments have altered key elements of policy rule construction. These developments are lower short-term real interest rates, the disappearing Phillips curve and better measures of inflation expectations. “Incorporating these developments yields a modernized policy rule that suggests the current level of the policy rate is about right over the forecast horizon,” Bullard said.
Video of Presentation and Audience Q&A:
Bullard was on a two-day tour of Memphis, Tenn., where the St. Louis Fed has a Branch. Besides meeting with civic leaders, Bullard toured a charter school that once housed the Memphis Branch and attended a special dinner commemorating the Branch’s centennial. Among other activities, he met with current and former members of the Branch’s board of directors on Friday, Oct. 19.
Bullard frequently visits communities in the four zones that make up the St. Louis Fed’s District. The other three zones are based in Little Rock, Ark., Louisville, Ky., and St. Louis.