The pronounced rise in uncertainty also has damped consumer spending and capital investment; households and businesses, confronted with heightened uncertainty, have pulled back from the marketplace, though that withdrawal has been partial and presumably temporary. The very great economic uncertainties that have arisen in the current environment have also, at least temporarily, resulted in a widening of bond spreads on high-yield instruments.
2  -2Taylor (1999) rule--the output gap and the deviation of inflation from target--can be thought of as capturing the influence of the drivers of monetary policy at business cycle frequencies, with the longer-lasting (lower-frequency) determinants of the level of the policy rate being subsumed into movements in r*.