First, the term “rule” suggests a rigid and mechanistic policy prescription that leaves no room for discretion or judgment. However, the argument that monetary policy should adhere mechanically to a strict rule, made by some economists in the past, has fallen out of favor in recent years.
Today most monetary economists use the term “rule” more loosely to describe a general policy strategy, one that may include substantial scope for policymaker discretion and judgment. Here I will use the term “policy” instead of “rule” to avoid the connotations of the latter.