This paper reviews recent literature on monetary policy rules, focusing on a New Keynesian perspective. It examines the design of monetary policy within a simple theoretical framework, considering real-world complications such as inflation targeting and credibility. The paper shows that optimal policy implicitly incorporates inflation targeting and highlights the gains from credible commitments to fight inflation. It also discusses the implications of frictions like imperfect information and the role of nominal price rigidities. The paper emphasizes the importance of a robust policy framework that is applicable across various macroeconomic models. It argues that monetary policy is both an art and a science, with the science providing useful principles for policy-making. The paper analyzes the optimal policy rule in the absence of commitment, showing that it embeds inflation targeting and adjusts the interest rate to offset demand shocks while accommodating supply shocks. It then considers the case with commitment, demonstrating that credible commitments can reduce inflationary bias and improve the current output/inflation trade-off. The paper also discusses practical problems in policymaking, including imperfect information and model uncertainty, and evaluates the implications of different monetary policy instruments. It concludes by emphasizing the importance of understanding the persistence of inflation and output in shaping optimal policy. The paper highlights the role of New Keynesian models in providing a framework for analyzing monetary policy and the need for credible commitments to achieve effective policy outcomes.This paper reviews recent literature on monetary policy rules, focusing on a New Keynesian perspective. It examines the design of monetary policy within a simple theoretical framework, considering real-world complications such as inflation targeting and credibility. The paper shows that optimal policy implicitly incorporates inflation targeting and highlights the gains from credible commitments to fight inflation. It also discusses the implications of frictions like imperfect information and the role of nominal price rigidities. The paper emphasizes the importance of a robust policy framework that is applicable across various macroeconomic models. It argues that monetary policy is both an art and a science, with the science providing useful principles for policy-making. The paper analyzes the optimal policy rule in the absence of commitment, showing that it embeds inflation targeting and adjusts the interest rate to offset demand shocks while accommodating supply shocks. It then considers the case with commitment, demonstrating that credible commitments can reduce inflationary bias and improve the current output/inflation trade-off. The paper also discusses practical problems in policymaking, including imperfect information and model uncertainty, and evaluates the implications of different monetary policy instruments. It concludes by emphasizing the importance of understanding the persistence of inflation and output in shaping optimal policy. The paper highlights the role of New Keynesian models in providing a framework for analyzing monetary policy and the need for credible commitments to achieve effective policy outcomes.