OPEN-SOURCE SCRIPT
Taylor Rule (Styled by Mongoose) + Macro Action Plan
Methodology:
This indicator implements the standard Taylor Rule to estimate a theoretically neutral federal funds rate (FFR) based on economic conditions.
Taylor Rule Formula:
FFR = r* + π + 0.5(π - π*) + 0.5 × Output Gap
π = current inflation rate
π* = inflation target
r* = natural real interest rate
Output Gap = 100 × (u* - u) / u*
u = actual unemployment rate
u* = natural unemployment rate
Visuals:
Teal Line = Taylor Rule Rate
Orange Line = Manual Fed Funds Rate (custom input)
Color Zone Highlight
Red = policy rate far below Taylor estimate (gap > +1.0)
Green = policy rate far above Taylor estimate (gap < -1.0)
Reference Lines:
0% (Zero Bound)
2% (Neutral Rate)
5% (Hawkish Zone)
How to Use:
A Taylor Rate above the actual Fed Funds Rate may imply accommodative conditions.
A Taylor Rate below the actual Fed Funds Rate may imply restrictive or tight policy.
The gap between the Taylor estimate and actual rate helps assess potential macro pressure on markets, yields, and risk assets.
Trader Application:
Helps forecast shifts in Fed stance and macro policy inflection points
Use as a regime filter for positioning in equities, bonds, FX, and commodities
Can support long/short macro strategies based on rate gap and inflation dynamics
Inputs (Editable):
Inflation rate
Inflation target
Neutral real rate (r*)
Actual and natural unemployment rate
Manual FFR value
This indicator implements the standard Taylor Rule to estimate a theoretically neutral federal funds rate (FFR) based on economic conditions.
Taylor Rule Formula:
FFR = r* + π + 0.5(π - π*) + 0.5 × Output Gap
π = current inflation rate
π* = inflation target
r* = natural real interest rate
Output Gap = 100 × (u* - u) / u*
u = actual unemployment rate
u* = natural unemployment rate
Visuals:
Teal Line = Taylor Rule Rate
Orange Line = Manual Fed Funds Rate (custom input)
Color Zone Highlight
Red = policy rate far below Taylor estimate (gap > +1.0)
Green = policy rate far above Taylor estimate (gap < -1.0)
Reference Lines:
0% (Zero Bound)
2% (Neutral Rate)
5% (Hawkish Zone)
How to Use:
A Taylor Rate above the actual Fed Funds Rate may imply accommodative conditions.
A Taylor Rate below the actual Fed Funds Rate may imply restrictive or tight policy.
The gap between the Taylor estimate and actual rate helps assess potential macro pressure on markets, yields, and risk assets.
Trader Application:
Helps forecast shifts in Fed stance and macro policy inflection points
Use as a regime filter for positioning in equities, bonds, FX, and commodities
Can support long/short macro strategies based on rate gap and inflation dynamics
Inputs (Editable):
Inflation rate
Inflation target
Neutral real rate (r*)
Actual and natural unemployment rate
Manual FFR value
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
TheRealMongoose
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
TheRealMongoose
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.