• This refers to a rule used by central banks to determine the right interest rate for the economy based on changes in price inflation and other economic conditions.
• It was proposed by American economist John Taylor as a tool to conduct rules-based monetary policy.
• The Taylor rule is often proposed as a solution to the problem of discretion involved in the framing of monetary policy due to the influence of political populism.
• It provides a formula to determine how much a central bank should target an increase or decrease in interest rates depending on the economy’s health.

Source:TH