In Taylor We Trust? Monetary Policy Can't be "Taylor-made"

Most House Republicans and several Senate Republicans support codifying the so-called "Taylor Rule" into law, which would mandate that the U.S. Federal Reserve sets its benchmark interest rate strictly based on a numerical formula alone. I do not support this approach for the following reasons:

1) Monetary policy, while grounded in economic science, is really more an art. Difficult judgement calls are asked of the U.S. Fed governors and voting regional Fed presidents. These judgments are based on complex and numerous economic and financial market parameters (often including international geopolitics), not all of which can be encapsulated into a neat formula.

2) Text books are certainly a helpful teaching guide but they are often simplistic; real life is much more messy. The Taylor Rule can serve as a useful guide as one of the analytic points for Fed interest rate decision making, but it shouldn't be the entire rule book. The Taylor Rule doesn't even effectively capture financial market conditions, which central bankers the world over are relying on more and more in practice, when they set interest rates.

3) Let's say there is a big change in global macroeconomic, geopolitical or financial market conditions that occurs just a couple of days before the Fed's policy meeting. Such an event can be expected to have significant economic impacts in the near future, which wise interest rate policy should account for, but which no static mathematical formula can quantify.

4) The argument is sometimes made that it was flexibility in decision making by the Federal Reserve that kept interest rates too low for too long, which is what helped precipitate the recent economic crisis. Without getting into the complex and nuanced economics of this debate, it is fair to say that central bankers have learned much since the recent crash, and are wiser, more vigilant, and more forward looking than they were before the crisis. This should serve as an argument for more, not less, flexibility in central bank decision making. Having an inflation and/or unemployment target is one thing, but forcing the Fed to set a specific interest rate as a means to achieve the target/s is wholly another thing.

Monetary policy, in short, should be tailor-made, not "Taylor-made".