Ladies and gentlemen, the taper has arrived

2/07/2014 01:47:00 PM
Back in December I posted a Taylor Rule calculator showing how supposedly objective empirical estimates of the Taylor Rule were actually correlated with ideology (conservative economists predicted positive interest rates, liberals predicted negative rates). The original version of the calculator automatically updates data from FRED, but unfortunately that version only works on my computer--FRED's servers do not allow cross-domain requests (for shame!) and blogger doesn't allow back-end access (double shame!). The silver lining, I guess, is that the old post still has the old data, allowing us to see how compares to today's data:

Taylor Rule

As proposed by several economists

r = π + α ( π π ) + β ( u u ) + γ
Actual Federal Funds Rate:
Predicted Federal Funds Rate:

This calculator has been updated to reflect the newest data as of this morning. Because the unemployment rate has fallen to 6.6 percent, all five economists are now predicting positive interest rates. Moreover, the effective federal funds is up, if only very slightly. This means that at long last, the "taper" has finally arrived.