# The Taylor Rule Summary::The Taylor rule is a monetary policy rule proposed by John Taylor... --- The Taylor rule is a monetary policy rule proposed by John Taylor, designed to guide central banks in setting interest rates to stabilize economic activity by targeting inflation and the output gap. It suggests that the federal funds rate (short-term interest rate) should be adjusted based on the difference between actual and target inflation, as well as the difference between actual and potential GDP. Clipped from [taylor rule - Google Search](https://www.google.com/search?q=taylor+rule&rlz=1C1CHBF_enUS1017US1017&oq=Taylor+Rule&gs_lcrp=EgZjaHJvbWUqCggAEAAYsQMYgAQyCggAEAAYsQMYgAQyBwgBEAAYgAQyBwgCEAAYgAQyBwgDEAAYgAQyBwgEEAAYgAQyBwgFEAAYgAQyBwgGEAAYgAQyBwgHEAAYgAQyBwgIEAAYgAQyBwgJEAAYgATSAQk4NjcwajBqMTWoAgiwAgHxBbDF_m-eCUAF&sourceid=chrome&ie=UTF-8) at 2025-04-26. ![[Taylor Rule.png]]