Double Inertia, Taylor Rules, and Monetary Policy Gradualism

RePEc Short ID: pcr255
ORCID iD: 0000-0001-9853-2520

Crawley, Edmund; Goodwin, William; Jacobson, Margaret M.; Winkler, Fabian

doi:10.17016/FEDS.2026.036

Working Paper

Double Inertia, Taylor Rules, and Monetary Policy Gradualism

Abstract: In recent decades, an empirically estimated double-inertial rule fits the path of changes in the federal funds rate better than a standard inertial Taylor rule. Inertial Taylor rules aim to capture monetary policy gradualism via slow adjustments in the level of the policy rate. Double-inertial rules build on this specification by also gradually adjusting the pace of change in the policy rate. Because a double-inertial rule explains more than twice the variation of changes in the policy rate than its standard inertial counterpart, we argue that practitioners should consider a double-inertial rule when characterizing U.S. monetary policy.

JEL Classification: E43; E52; E58;

https://doi.org/10.17016/FEDS.2026.036