Inflation shows both the value and limits of monetary-policy rules

It was a curious omission. In February, when the Federal Reserve published the winter edition of its semi-annual report to Congress, it dropped a normal section outlining the appropriate level of interest rates as determined by “monetary-policy rules”. Its inclusion might have been awkward, because it would have suggested that rates should be as high as 9%, when the Fed still had them near to 0%. In subsequent hearings at least three members of Congress pressed Jerome Powell, the Fed’s chairman, to explain its absence. Mr Powell promised that the section would be back in its next report. And so it was when the summer edition was published on June 17th—though only after the Fed had started to catch up to the rules’ prescriptions by rapidly raising rates.

As controversies go, the disappearance of a three-page section in a lengthy policy report was rather minor. It garnered scant media coverage. Nevertheless, it was important. It shone light on a decades-old question that is being asked with more insistence amid soaring inflation: should central banks limit their discretion and set interest rates according to black-and-white rules?