Even monetary policy rules that use recent economic outcomes or money supply growth rates presuppose that the underlying historical structure 1  BIS Review 90/2000  from which the rules are derived will remain unchanged in the future. But such a forecast is as uncertain as any. This uncertainty is particularly acute for rules based on money growth.
In this environment, policymakers have to be more cautious than in the past about the assumptions that underpin our forecasts – and simple policy rules based around estimates of the output gap are no longer a useful guide for our actions.