The Taylor Rule takes explicit account of only very recent observations on inflation and output, but these are, to be sure, important determinants of future inflation. An inflation forecast approach allows policymakers to consider a wider range of current and past information in projecting future outcomes.
D.  Setting the inflation target  Setting the inflation target to be consistent with price stability sounds straightforward, but an important theme at this summer’s conference was the variety of options and implications of this choice. The obvious choice would be a target of zero for inflation, taking into account biases in published price measures.