A Sequential Policy-Rate Diagnostic: Monetary Absorption and the Inflation Floor Safeguard

Abstract What interest rate is implied when monetary, inflation, and employment signals diverge? This paper introduces the Monetary-Absorption Rule with a Common-Inflation Floor and Employment Safeguard (MAR-IFS), a sequential alternative to additive policy rules. Applying current-vintage data, all nine specifications signal normalization by 2021Q4. Same-input additive and Taylor benchmarks confirm this broad timing but trace different paths. When signals align, addition compounds them, producing 8.3% versus 6.7% under MAR-IFS. When signals conflict, addition allows offsetting, producing 3.5% versus 4.0%. The max operator blocks offsetting when signals conflict and blocks mechanical accumulation when they align, while revealing which signal binds.