Double Inertia, Taylor Rules, and Monetary Policy Gradualism

Edmund Crawley, William Goodwin, Margaret Jacobson and Fabian Winkler

No 2026-036, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In recent decades, an empirically estimated double-inertial rule fits the path of changes in the federal funds rate better than a standard inertial Taylor rule. Inertial Taylor rules aim to capture monetary policy gradualism via slow adjustments in the level of the policy rate. Double-inertial rules build on this specification by also gradually adjusting the pace of change in the policy rate. Because a double-inertial rule explains more than twice the variation of changes in the policy rate than its standard inertial counterpart, we argue that practitioners should consider a double-inertial rule when characterizing U.S. monetary policy.

Keywords: monetary policy rules; federal funds rate; interest rates; central banks (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
Pages: 23 p.
Date: 2026-06-02
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:103380

DOI: 10.17016/FEDS.2026.036

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