William C Dudley: Panel remarks at the Brookings Institution Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at “The Fed at a crossroads: Where to go next?”, Brookings Institution, Washington DC, 15 October 2015. *  *  *  It is a great pleasure to be here today to participate in this panel with John Taylor. I am going to take today’s topic – “Where to go next?” – to address the issue of how monetary policy should be conducted. This is an issue that is getting considerable attention among policymakers here in Washington, D.C. To put succinctly the question I wish to tackle: Is it better for policymakers to start with a formal rule as the default position, or for policymakers to have a more flexible approach that considers a broader set of factors in setting the monetary policy stance? As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. 1 To get right to the punch line, I favor a more flexible approach that incorporates a broader set of factors into the monetary policy decision-making process. The world is complex and everchanging. There are many factors that can affect the economic outlook and the attainment of the Federal Reserve’s mandated objectives and, thereby, the appropriate stance of monetary policy.
Just as a k-percent rule requires a stable relationship between a monetary aggregate and nominal GDP (i.e., stable money velocity), a Taylor Rule needs a stable relationship between the policy rate and financial conditions. BIS central bankers’ speeches  3