# Taylor Rule

*Macro & Economy — Finicade finance glossary*

A formula for where a central bank should set interest rates, given inflation and the output gap. Rates rarely follow it exactly, but it's the benchmark against which policy is judged.

**Also known as:** the-taylor-rule

**Related terms:** [Monetary Policy](https://finicade.com/glossary/monetary-policy), [Interest Rate](https://finicade.com/glossary/interest-rate), [Neutral Rate](https://finicade.com/glossary/the-neutral-rate)

**Taught in:** Macro & Markets — Monetary Policy: Rules, Targets & the ZLB

Source: https://finicade.com/glossary/taylor-rule