In this equation, i t {\displaystyle \,i_{t}\,} is the target short-term nominal interest rate (e.g. the federal funds rate in the US, the Bank of England base rate in the UK), π t {\displaystyle \,\pi _{t}\,} is the rate of inflation as measured by the GDP deflator, π t ∗ {\displaystyle \pi _{t}^{*}} is the desired rate of inflation, r t ∗ {\displaystyle r_{t}^{*}} is the assumed equilibrium real interest rate, y t {\displaystyle \,y_{t}\,} is the logarithm of real GDP, and y ¯ t {\displaystyle {\bar {y}}_{t}} is the logarithm of potential output, as determined by a linear trend.