{'fraction_non_alphanumeric': 0.0136986301369863, 'fraction_numerical': 0.0064464141821112, 'mean_word_length': 5.336734693877551, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Policy Rule Forward Guidance Following the COVID-19 Recession

The Federal Open Market Committee recently adopted a far-reaching revised Statement on Longer-Run Goals and Monetary Policy Strategy. The two major changes are that the Committee will implement flexible average inflation targeting and will mitigate shortfalls, rather than deviations, of employment from its maximum level. At its September meeting, the Committee approved enhanced forward guidance which maintains the federal funds rate at the Effective Lower Bound until maximum employment is attained and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. It is not obvious that this is either desirable or credible. We propose policy rule forward guidance as an alternative mechanism for the Committee to communicate the eventual exit from the Effective Lower Bound and beyond which is consistent with both the revised statement and the Committee’s projections through 2023. In contrast with the enhanced forward guidance, policy rule forward guidance removes accommodation as the economy improves. We describe scenarios with average, fast, and slow recoveries to illustrate how policy rule forward guidance could work in practice.