Policy Calibration Tool

This data series is part of the Center for Monetary Research.

The Policy Calibration Tool (PCT) computes the federal funds rate path that will best achieve the Federal Reserve’s dual mandate given your views of the economy and interpretations of the mandate. The tool is based on methodology developed by Barnichon and Mesters (2023), described in Barnichon and Singh (2026).

As a benchmark, the tool displays an initial set of forecasts that reflect market participants’ latest median forecasts for inflation, the three-month Treasury bill, and unemployment (black lines). The gray shading in each panel reflects the range of forecasts in the most recent Survey of Professional Forecasters (SPF).

• Use the sliders to select your own forecasts for inflation and unemployment given the currently anticipated path for the federal funds rate. The black lines in the panels will adjust automatically.
• Use the middle slider to choose how you value the relative importance of the two policy goals—inflation at 2% versus full employment—with the slider in the middle meaning you consider both equally important. Moving the slider to the left puts more weight on inflation, while moving it to the right puts more weight on the unemployment rate.
• The PCT will automatically generate the model’s estimated appropriate policy paths (green lines) given your forecasts and policy preference.
  • The green line in the middle panel will depict the preferred policy path computed by the PCT.
  • The green lines in the inflation and unemployment panels will reflect how this policy scenario will affect future inflation and unemployment.

Please cite as the SF Fed Policy Calibration Tool, based on work by Barnichon and Mesters (2023).

More about the Policy Calibration Tool model

To help users, the PCT suggests an initial set of forecasts that reflects market participants’ latest median forecasts for inflation, unemployment, and the three-month Treasury bill.

The initial outlook from market participants is taken from the Survey of Professional Forecasters (SPF), which is conducted quarterly by the Federal Reserve Bank of Philadelphia. The survey asks 35–40 forecasters about their expected outlook over the next three quarters and next two years. For long-run values, the suggested entry for long-run inflation is set at 2%, reflecting the Federal Reserve’s inflation target, and the entry for long-run unemployment is arbitrarily set at 4%.

The PCT reports the range of forecasts across professional forecasters (gray shaded area) to help users assess the plausibility of their forecasts relative to market forecasts.

The middle slider lets users decide the weight to put on stabilizing inflation versus unemployment. Moving the slider all the way to the left would mean that the only goal of monetary policy is to stabilize inflation, no matter the cost to unemployment. Moving the slider all the way to the right does the opposite, which would focus monetary policy only on stabilizing unemployment, no matter the inflation cost.

Application developed by Cheikh Fall and Aayush Singh. The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System.

References

Barnichon, Regis, and Geert Mesters. 2023. “A Sufficient Statistics Approach for Macro Policy.” American Economic Review 113(11, November), pp. 2,809–2,845.

Barnichon, Regis and Aayush Singh. 2026. “Calibrating Monetary Policy.” Forthcoming as FRBSF Economic Letter.

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Contact Regis.Barnichon (at) sf.frb.org