Single monetary policy rule “not ready for prime time” – Fed’s Williams

February 25, 2016

New York, New York – Prescribing a single monetary policy rule for the Federal Reserve to follow is ill-advised, said John C. Williams, president and CEO of the Federal Reserve Bank of San Francisco.

While some have suggested confining the Fed to one rule that would dictate their policy decisions, Williams said this would be counterproductive, pointing out that the Fed’s unique structure brings together people with “different backgrounds, different experiences, and different opinions.” He continued, “There is a lot of disagreement among policymakers and economists about what works best. Trying to pigeonhole all of them into one rule runs counter to the federated structure of the Fed that seeks to incorporate a diversity of views. Operating under one rule would mean losing the richness that’s fundamental to our success.”

Williams said he favors looking at a range of models, rules, and data to get the fullest range of information possible. “The truth is that there is no absolutely right rule. They’re all just different ways to think about policy, and to come to a truly educated decision, it helps to look at the range of options.”

Ultimately, he said, it would be unwise to place all bets on one approach.

“While I understand the impetus behind wanting a single rule to follow, it’s just not ready for prime time. It reminds me of the FDR quote that rules aren’t necessarily sacred, principals are.”

Williams made the remarks at an address to students and faculty at NYU’s Stern School of Business.

Matthew Schiffgens
Federal Reserve Bank of San Francisco
(415) 974-3246

The Federal Reserve Bank of San Francisco, with branch offices in Los Angeles, Seattle, Salt Lake City, and Portland, and a cash processing office in Phoenix, provides wholesale banking services to financial institutions throughout the nine western states. As the nation’s central bank, the Federal Reserve System formulates monetary policy, serves as a bank regulator, administers certain consumer protection laws, and is fiscal agent for the U.S. government. Follow us on Twitter at