Taylor's Rule for calculating prime interest rate

Taylor's Rule Estimating where interest rates should be. According to Taylor's Rule, the Prime Interest Rates should currently be : (a)   "neutral" Real Prime Rate                                                                          5.5%         (average September 1989 - July 1995; 1999 - 2007) (b)    Expected CPI inflation: 3Q 2011                                                               5.0% (c)      0.5 x (Current CPI - CPI  "target")                                                            -0.4%          = 0.5 x (3.7% - 4.5%) (d)     0.5 x (Output "Gap")         = 0.5 x (-2.2%)                                                                                            -1.1% Target Prime Interest Rate:                                                                                 9.0% Current Prime Interest Rate:  01 September 2010                                               10.0% Comment:   The current outlook for inflation and the slow recovery in the economy could still mean another 0.5% interest rate cut this month, prime falling to 9.5%, according to a simple Taylor rule.  By Cees Bruggemans, Chief Economist FNB