Stein, Jeremy C.; Sunderam, Aditya - 2021
We develop a model of monetary policy with two key features: (i) the central bank has private information about its … long-run target for the policy rate; and (ii) the central bank is averse to bond-market volatility. In this setting …, discretionary monetary policy is gradualist, or inertial, in the sense that the central bank only adjusts the policy rate slowly in …