Using the money market rate as the target for monetary policy could help reduce volatility in inflation, the output gap and the yield curve, the Bank for International Settlements (BIS) said in a paper published Monday.

Petra Gerlach-Kristen, an economist at the BIS, and Barbara Rudolf, an economist at the Swiss National Bank (SNB), found that targeting the money market rate, as done by the Federal Reserve and the SNB, rather than the repurchase rate, as in the case of the Bank of England