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tomveiltomveil t1_it3degc wrote

You're missing the last several months, during which the gap has closed about halfway.

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Efficient-Sport-6673 OP t1_it3atlv wrote

For those not economically inclined: Fed funds rate is the target interest rate for fed. When you hear the news saying fed is raising rates. they mean fed funds rate. Fed funds rate is the US interbank overnight rate. Taylor rule is a mathematical rule stating what the interest rate should be in order to reach the targeted inflation rate.

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dml997 t1_it46drh wrote

Can you please provide more info on the Taylor rule? I wasn't able to find it on fred.

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Efficient-Sport-6673 OP t1_it46zdh wrote

It's not something that is published, you have to calculate taylor rate yourself from inflation and output data. Those data can be found on Fred database. You can find the exact taylor rule on Wikipedia.

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michigician t1_it41xat wrote

I searched the source for "Taylor rule" but did not get a result that applied to this graph.

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Efficient-Sport-6673 OP t1_it46o47 wrote

Taylor rule ineterst rate is not published by any party, you have to calculate it yourself from several different statistics, all of which are available from source.

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Ok-Pomegranate-6189 t1_itq8dy5 wrote

What is the goal under the Taylor rule? The ideal interest rate would be a lot different if they wanted to ensure the bank’s mortgages didn’t lose value vs promoting economic growth.

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Efficient-Sport-6673 OP t1_itqamb4 wrote

Price stability. It really just suggests what the nominal rate should be in order to reach the inflation target. In this analysis I assumed target to be 2%. BTW taylor rule has actually approximated actual fed monetary policy quite well in the past.

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