Simple rules limit the amount of information used and underrate the need for judgement in the use and interpretation of any economic model. They are no substitute for an ongoing articulated analysis of all the economic and monetary forces at work in the economy and for the need to check all policy proposals for their robustness across a variety of frameworks.
*** My remarks on rules should, however, not be interpreted as implying that I am advocating unconstrained discretion in the conduct of monetary policy. On the contrary, monetary authorities need to behave in a systematic and predictable manner in order to enhance policy effectiveness and credibility. There are two main reasons for this.