Fed Chair Dilemma Simulator | Central Bank Tradeoff Lab

Macroeconomic Presets

8-Quarter Target Rate (FFR) Drag to Steer

Policy Transmission Parameters

• Neutral Rate (r*): 2.75%

• Inflation Target (π*): 2.00% (PCE)

• Natural Unemployment (u*): 4.20%

• Transmission Lag: 2–4 Quarters peak effect

Terminal Policy Rate (Q8) 4.00% Neutral: 2.75%

Projected Inflation (Q8) 2.28% PCE Target: 2.00%

Unemployment (Q8) 4.42% Natural Rate: 4.20%

Avg Taylor Rule Gap +0.35% Hawkish/Dovish Divergence

Macroeconomic Dynamic Projection (8-Quarter Horizon)

Fed Funds Target

Inflation (PCE)

Unemployment (U-3)

Taylor Benchmark

Dual-Mandate Trajectory Assessment Soft Landing Probable

Your path achieves substantial disinflation down toward target without prompting a severe contraction in payrolls. Policy transmission lag absorbs tightening, landing inflation close to 2.0% within 8 quarters.

Policy Transmission Lags (Friedman's Wedge)

Rate changes take 12–18 months to fully filter into aggregate demand and corporate hiring. Premature aggressive rate cuts risk reigniting wage-price spirals, while keeping rates restrictive for too long risks an abrupt non-linear rise in layoffs.

Taylor Rule & The Neutral Rate (r*)

The Taylor Rule dictates: i_t = r* + π_t + 0.5(π_t - π*) - 1.0(u_t - u*). When the Fed Funds rate sits significantly below this benchmark, monetary stance is stimulative; above it, restrictive.