traditional policy rules are backward looking in the sense that they use available data about inflation and output. but monetary policy needs to be forward looking, as i discussed, and there are rules that rely on forecasts of inflation and output. finally, many have advanced the view that, when times are particularly uncertain, monetary policy should react cautiously to incoming information. 21 that insight leads to rules that incorporate inertia, thereby slowing down the movement of rates over time. each of these insights has some validity, and each has important implications for the prescriptions of a policy rule. in general, the unemployment rate is more informative of the state of the business cycle than gdp because of the difficulties in estimating potential output. see charles a. fleischman and john m. roberts ( 2011 ), “ from many series, one cycle : improved estimates of the business cycle from a multivariate unobserved components model, ” finance and economics discussion series 2011 - 46 ( washington : board of governors of the federal reserve system, october ), https : / / www. federalreserve. gov / pubs / feds / 2011 / 201146 / 201146pap. pdf. see john b. taylor ( 1993 ), “ discretion versus policy rules in practice, ” carnegie - rochester conference series on public policy, vol. 39 ( december ), pp. 195 - 214. see william brainard ( 1967 ), “ uncertainty and the effectiveness of policy, ” american economic review, vol. 57 ( may ), pp. 411 - 25. in discussing the effects of uncertainty on monetary policy, blinder ( 1998, p. 11 ) notes that policymakers “ should compute the direction and magnitude of their optimal policy move... and then do less. ” see alan s. blinder ( 1998 ), central banking in theory and practice ( cambridge, mass. : mit press ). others have suggested that inertia may be a feature of making decisions by committee ; see clare lombardelli, james proudman, and james talbot ( 2005 ), “ committees versus individuals : an experimental analysis of monetary policy decision making, ” international journal of central banking, vol. 1 ( june ), pp. 181 - 205 ; and francisco ruge - murcia and alessandro riboni ( forthcoming ), “ collective versus individual decision - making : a case study of the bank of israel law, ” european economic review. - 12 figure 7 shows the prescriptions of three simple policy

is of material importance to us. social media has also affected the way we consume news and interact with each other. this medium is playing an increasingly important role in society and influencing macroeconomic and financial outcomes. as an example, corbin fox will present his work with coauthors tomorrow on the effect of social media on the bank runs that took place earlier this year. on the methodological side, machine - learning techniques have also had a profound effect on how we think about modeling complex macroeconomic outcomes. this morning, philippe goulet coulombe will discuss how neural networks help model the volatility of various macroeconomic variables, and joel marbet and yucheng yang will discuss how new methods are being used to solve models with heterogeneous agents, which are crucial to assess the distributional consequences of economic policies. 2 / 3 bis - central bankers'speeches advances in natural language processing and machine learning have also improved our ability to forecast and nowcast a wide range of macroeconomic and financial indicators, a topic that will also be covered in a few sessions tomorrow. in closing, i hope you have many fruitful and informative conversations in this room and during breaks about the usefulness of nontraditional data and new techniques for macroeconomic analysis. i also encourage you to continue your discussions after the conference ends and to seek opportunities for joint work so that we can further develop our understanding of these exciting new tools. welcome to the federal reserve! i hope you enjoy the conference. 1 the views expressed here are my own and not necessarily those of my colleagues on the federal open market committee. 2 see tomaz cajner, laura j. feiveson, christopher j. kurz, and stacey tevlin ( 2022 ), " use of nontraditional data, " in wendy edelberg, louise sheiner, and david wessel, eds., recession remedies : lessons learned from the u. s. economic policy response to covid - 19 ( washington : brookings institution press ), pp. 315 – 46. 3 see lisa d. cook ( 2023 ), " generative ai, productivity, the labor market, and choice behavior, " speech delivered at the national bureau of economic research economics of artificial intelligence conference, toronto, canada, september 22. 3 / 3 bis - central bankers'speeches