Compute the policy interest rate suggested by the Taylor rule.
Please do not make financial decisions based on these results.
What is the Taylor Rule Calculator?
Compute the policy interest rate suggested by the Taylor rule. To use the Taylor Rule Calculator, enter neutral real rate, inflation, inflation target, output gap; it returns suggested policy rate, and shows them instantly as you type.
Where the Taylor Rule Calculator fits
Compute the policy interest rate suggested by the Taylor rule. The main figure it returns is the Suggested policy rate, worked out from the values you enter.
It belongs with the other macroeconomics tools. If you are comparing options or checking a result from another angle, try the Inflation Rate Calculator, Unemployment Calculator (Unemployment Rate) or the Currency Forward Calculator.
How to use the Taylor Rule Calculator
- Enter your numbers. The inputs are Neutral real rate (%), Inflation (%), Inflation target (%), Output gap (%). Use real figures from your own records where you can. Fields marked optional can stay at zero.
- Read the result. The highlighted box gives the Suggested policy rate. Tables and charts break it down further.
- Test other scenarios. Results update as you type. Change one value at a time to see what drives the answer, and press Reset to go back to the defaults.
Formula and how it works
Example with real numbers
Here is the Taylor Rule Calculator using the default values shown in the calculator above:
Inputs
| Neutral real rate (%) | 1 |
|---|---|
| Inflation (%) | 3 |
| Inflation target (%) | 2 |
| Output gap (%) | 0.5 |
Results
| Suggested policy rate | 4.75% |
|---|
With these inputs the calculator returns Suggested policy rate: 4.75%. Change any value in the calculator to see how the result moves.
What if you change one input?
Sensitivity check: raising Neutral real rate (%) from 1 to 1.2 (about 20% higher) and leaving everything else as in the example above changes the results like this:
| Result | Example | After the change | Change |
|---|---|---|---|
| Suggested policy rate | 4.75% | 4.95% | +4.2% |
The input that moves the result most is the one to check twice. Change it in the calculator above to test your own case.
Method and limits. This calculator applies the formula in the section above to your inputs, in your browser; nothing you enter is stored on our servers. The result is only as accurate as the numbers you enter and the formula shown above. It is for information, not financial, tax or legal advice.
Frequently asked questions
What does the Taylor rule guide?
Central bank interest rate settings based on inflation and the output gap.
What is the spending multiplier?
It is 1 divided by one minus the marginal propensity to consume, so an MPC of 0.8 gives a multiplier of 5.
Where do the economic inputs come from?
Use official sources such as the BEA, BLS, Federal Reserve, IMF or World Bank for GDP, CPI, unemployment and money supply figures.
Are the results guaranteed?
No. Results depend entirely on the numbers you enter and the formulas shown on this page. Please do not make financial decisions based on them alone; confirm important figures with a licensed professional.
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