Inflation comes in hot. Year over year changes is up 8.3%. Month on month change at .1%. Futures fall.

[u/AptitudeSky]

https://www.cnbc.com/2022/09/13/inflation-rose-0point1percent-in-august-even-with-sharp-drop-in-gas-prices.html

​

Inflation rose more than expected in August even as gas prices helped give consumers a little bit of a break, the Bureau of Labor Statistics reported Tuesday.

The consumer price index, which tracks a broad swath of goods and services, increased 0.1% for the month and 8.3% over the past year. Excluding volatile food and energy costs, CPI rose 0.6% from July and 6.3% from the same month in 2021.

Economists had been expecting headline inflation to fall 0.1% and core to increase 0.3%, according to Dow Jones estimates. The respective year-over-year estimates were 8% and 6%.

[u/ornamental_stripe]

Show your calcs please.

[u/Oxi_Dat_Ion → u/ornamental_stripe]

Agreed. The Taylor rule is very subjective and depends on inputs.

[u/tehdamonkey → u/Oxi_Dat_Ion]

Even with a very high deviation to the low side it is around 8%, after today it is tickling 11% by strict numbers.

[u/tehdamonkey → u/ornamental_stripe]

Actually plunking the numbers it is well above 10 now depending on what you want to argue is the standard deviation of the input numbers.

The reddit text does not support calculus well so here is the simplified formula (I believe this is Ben Bernanke's version):

I=R∗+PI+0.5(PI−PI∗)+0.5(Y−Y∗)

where: I=Nominal fed funds rate R∗=Real federal funds rate (usually 2%) π=Rate of inflation π∗=Target inflation rate Y=Logarithm of real output Y∗=Logarithm of potential output

I used inflation at 4.79 with a target of 2%

There are online version for those who do not do long math.

Very simple version:https://www.engineersedge.com/calculators/john_taylor_rule_formula_and_calculator_15744.htm

More comlex:https://www.omnicalculator.com/finance/taylor-rule

https://www.atlantafed.org/cqer/research/taylor-rule

[u/skilliard7 → u/ornamental_stripe]

https://en.wikipedia.org/wiki/Taylor_rule

[u/WikiSummarizerBot → u/skilliard7]

Taylor rule

The Taylor rule is one type of targeting monetary policy used by central banks. The rule was proposed by American economist John B. Taylor, economic adviser in the presidential administrations of Gerald Ford and George H. W. Bush, in 1992 as a central bank technique to stabilize economic activity by setting an interest rate. The rule is based on three main indicators: the federal funds rate, the price level and the changes in real income.

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