Taylor Rule

[Sanjay Sachdev]

Hi,
I am bit confused on Taylor’s Rule, as i guess Interset rates are inversely related with inflation. taylor’s formula indicates that Interest rates are postively relates with inflation. as i know, if interest rate increases ppl will consume less and it’ll be an contractionary effect in the economy. then how in the below equation interest rates increases with increase in inflation ?? please help me to understand this…

 

[freegg]

R is the central bank policy rate, and you can see from the formula it is inversely related to the central bank target inflation rate , that is the second pi in the bracket

 

[Sanjay Sachdev]

i got it now thnx