Recent research has emphasized that the Federal Reserve under Chairman Alan Greenspan was forward looking, smoothed interest rates, and focused on core inflation. The semiannual monetary policy reports to U.S. Congress indicate that the measure of inflation used in monetary policy deliberations...

This article estimates a Taylor rule according to which the Federal Reserve is forward looking, focused on core inflation, and smoothes interest rates. Using the Greenbook inflation forecasts and the real-time output gap, the estimated policy rule predicts very well the actual path of the...