He writes

About a decade ago, I wrote a paper on monetary policy in the 1990s (published in this book). I estimated the following simple formula for setting the federal funds rate:


Federal funds rate = 8.5 + 1.4 (Core inflation – Unemployment).

Here "core inflation" is the CPI inflation rate over the previous 12 months excluding food and energy, and "unemployment" is the seasonally-adjusted unemployment rate. The parameters in this formula were chosen to offer the best fit for data from the 1990s.  You can think of this equation as a version of a Taylor rule.

Eddy Elfenbein has recently replotted this equation.  Here it is:

This is functionally equivalent to my argument about the natural rate. Essentially, Greg’s rule attempts to match the Funds rate to the natural rate (with a little bit of kick on each side for stability).