Research published yesterday by the National Bank of Belgium seeks to find a middle ground between optimal monetary policy and a simple rules-based approach.

Authors Pelin Ilbas, Øistein Røisland and Tommy Sveen define optimal policy as a central bank minimising a loss function based on all available information, while a rules-based policy sets the interest rate based on a subset of that information – such as the inflation and output gap included in the Taylor rule.

The working paper, Robustifyi