Monetary Policy Analysis
G10 Taylor Rule Monitor
Prescriptive monetary policy rates for the G10 economies using the Taylor (1993) rule. Compares central bank policy rates against the rate implied by current inflation and the output gap. Data sourced from FRED; output gaps computed via CBO potential GDP (US) and HP filter (all others).
Last refreshed: 28 Jul 2026, 05:31 · Data cached 12 hours
Overview
Policy Rate vs Taylor Rule Prescription
Select a country to see the detailed Taylor Rule breakdown. Positive gap (red) means the implied rate exceeds the actual rate — policy is looser than prescribed.
United States — Federal Reserve
🇺🇸 United States Taylor Rule
Inflation target: 2% · r*: 0.5% · Output gap: CBO Potential GDP
Actual Policy Rate vs Taylor Rule Implied Rate
Taylor Rule Components: CPI Inflation (YoY %) & Output Gap
Output gap = % deviation of real GDP from potential. US uses CBO potential GDP.
Latest Quarter
2026-Q1
Actual Rate
3.64%
Implied Rate
4.05%
Implied end 2026
3.46%
Implied end 2027
2.98%
Gap (Implied − Actual)
+0.41%
CPI Inflation (YoY)
2.70%
Output Gap (CBO)
0.98%
Cross-Country Comparison
G10 Taylor Rule Gap Ranking
Sorted by gap (implied minus actual). Positive gap means policy is looser than the Taylor Rule prescribes; negative means tighter.
| Country | Actual Rate | Implied Rate | Gap | YE '26 Implied† | YE '27 Implied† | Inflation | Target | Output Gap | Stance |
|---|---|---|---|---|---|---|---|---|---|
| 🇯🇵Japan | 0.42% | 4.18% | +3.77% | 1.97% | 1.61% | 3.31% | 2.0% | 0.44% | Too Loose |
| 🇳🇿New Zealand | 2.50% | 4.07% | +1.57% | 3.06% | 2.78% | 3.08% | 2.0% | -0.10% | Too Loose |
| 🇬🇧United Kingdom | 4.55% | 5.14% | +0.59% | 3.02% | 2.69% | 3.67% | 2.0% | 0.27% | Too Loose |
| 🇺🇸United States | 3.64% | 4.05% | +0.41% | 3.46% | 2.98% | 2.70% | 2.0% | 0.98% | Neutral |
| 🇪🇺Eurozone | 1.93% | 2.17% | +0.24% | 2.39% | 2.22% | 2.02% | 2.0% | -0.70% | Neutral |
| 🇳🇴Norway | 4.00% | 3.91% | -0.09% | 2.79% | 2.57% | 3.10% | 2.0% | -0.49% | Neutral |
| 🇨🇦Canada | 2.25% | 2.01% | -0.24% | 2.28% | 2.24% | 2.15% | 2.0% | -1.43% | Neutral |
| 🇨🇭Switzerland | -0.04% | -0.62% | -0.58% | 1.63% | 1.61% | 0.17% | 1.0% | -0.74% | Too Tight |
| 🇸🇪Sweden | 1.93% | 0.32% | -1.61% | 2.70% | 2.38% | 0.50% | 2.0% | 0.14% | Too Tight |
| 🇦🇺Australia | 4.23% | 2.50% | -1.74% | 2.96% | 2.75% | 2.40% | 2.5% | -0.71% | Too Tight |
† YE '26 and YE '27 implied rates are projected using consensus inflation forecasts. Output gap assumed to converge linearly to zero.
G10 Panel
All Ten Taylor Rules vs Rates
Every G10 economy side by side. Solid line = actual policy rate. Dashed line = Taylor Rule implied rate. Dotted line = consensus forecast path to end-2027. Shaded area = gap between prescribed and actual policy.
Year-end 2026 and 2027 implied rates are projected using consensus inflation forecasts (Outlook). Output gap assumed to converge linearly to zero.
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Methodology
Model Specification
i = r* + pi + 0.5*(pi - pi*) + 0.5*(output_gap)
Output Gap Method
- US: CBO Potential GDP (GDPPOT)
- Others: HP Filter (lambda=1600) on log(Real GDP)
Notes
- r* values are country-specific estimates of the equilibrium real rate
- Inflation target pi* matches each central bank's official target
- CPI index levels converted to 4-quarter (YoY) percent change where available
- Japan uses GDP deflator as inflation proxy (OECD CPI series discontinued on FRED)
- GDP levels reconstructed from QoQ growth rates for SE, CH, NZ, NO
- All series are quarterly frequency (monthly data averaged to quarterly)
