Does Taylor rule pin down inflation?

The U.S. Congress is going to introduce a legislation which ties the hands of Federal Reserve. Basically, the idea is that instead of giving full discretion for the Fed to set nominal interest rate, now the Fed has to follow a Taylor rule. The Fed chairman has to explain any policy difference from the rule to the often hostile partisan Congress. The inventor of Taylor rule, John Taylor, will testify to the Congress. Needless to say, the Fed and their friends in Congress will fight back fiercely.

It may be an encouraging news for the New Keynesian academics, who witness their theory of monetary policy becomes orthodox. However, a scrutiny on the rule may horrify them, since this version of Taylor will cause exploding inflation according their theory.

So let us see what is this rule: “The term ‘Reference Policy Rule’ means a calculation of the nominal Federal funds rate as equal to the sum of the following: (A) The rate of inflation over the previous four quarters. (B) One-half of the percentage deviation of the real GDP from an estimate of potential GDP. (C) One-half of the difference between the rate of inflation over the previous four quarters and two. (D) Two.

Part (B) basically says, nominal interest rate should rate less than one for one to inflation. In fact, it is one half.