πŸ“ Monetary Policy Rules Tracker

Taylor (1993), Adjusted Taylor, Balanced Approach & First-Difference rules vs. actual fed funds Β· Fed MPR Box 4 style Β· Source: FRED
Updated: July 12, 2026

Historical: Actual FFR vs. Policy Rules (1990–present, quarterly)

Actual FFR Taylor Rule (1993) Adjusted Taylor (1993) Balanced Approach Rule First-Difference Rule

Live Calculator β€” adjust inputs to reprice both rules

Taylor Rule (1993)
β€”
Balanced Approach Rule
β€”
Divergence (Balanced βˆ’ Taylor)
β€”
When U > U*, the Balanced Approach prescribes a lower rate than Taylor. Divergence = 0 when unemployment is exactly at NAIRU.
Current Adjusted Taylor (1993)
4.34%
Current First-Difference Rule
4.14%
Both are path-dependent (accumulated ELB shortfall / lagged actual FFR), so they're shown as latest computed values rather than live-editable β€” see historical chart above.

Sensitivity β€” Prescribed rate vs. unemployment (other inputs held fixed)

Taylor Rule (1993): R = r* + Ο€ + 0.5Β·(Ο€ βˆ’ Ο€*) βˆ’ 1.0Β·(U βˆ’ U*)

Adjusted Taylor (1993): R = max(R_T93 βˆ’ Z, ELB), where Z is the cumulative sum of past Taylor-rule shortfalls below the ELB (Reifschneider-Williams "lower-for-longer" makeup).

Balanced Approach Rule: R = r* + Ο€ + 0.5Β·(Ο€ βˆ’ Ο€*) βˆ’ 2.0Β·(U βˆ’ U*)

First-Difference Rule: R = FFR_(tβˆ’1) + 0.5Β·(Ο€ βˆ’ Ο€*) βˆ’ (U_t βˆ’ U_(tβˆ’4))

The first three rules are written using the unemployment gap (via Okun's Law), where a 1% rise in unemployment β‰ˆ 2% drop in output. The Balanced Approach doubles the unemployment coefficient from βˆ’1.0 to βˆ’2.0, prescribing 200 bps of cuts per 1% of excess unemployment vs. 100 bps under Taylor. The Adjusted Taylor rule accounts for periods when the Taylor rule prescribes a rate below the effective lower bound (ELB) by holding the prescribed rate lower for longer once liftoff occurs, to make up for the shortfall in accommodation. The First-Difference rule instead anchors off the prior quarter's actual fed funds rate and reacts to the year-over-year change in unemployment, making it inertial and less sensitive to real-time estimates of r* or U*.

Sources: FRED β€” FEDFUNDS, PCEPILFE (Core PCE 4-quarter YoY), UNRATE, NROU (CBO NAIRU), quarterly. r* held constant at 0.5%, ELB at 0.125% (standard Fed Research assumptions).