I hope that the benefits of greater descriptive accuracy will outweigh the costs arising from any terminological confusion. How do these two policy approaches differ, and what are their underlying rationales?
Under a simple feedback policy, the central bank’s policy instrument - the federal funds rate in the United States - is closely linked to the behavior of a relatively small number of macroeconomic variables, variables that either are directly observable (such as employment or inflation) or can be estimated from current information (such as the economy’s full-employment level of output).