In
macroeconomics,
discretionary policy is an
economic policy based on the
ad hoc judgment of policymakers as opposed to policy set by predetermined rules. For instance, a
central banker could make decisions on interest rates on a case-by-case basis instead of allowing a set rule, such as the
Taylor rule or
Friedman's k-percent rule, to determine interest rates or the money supply. In practice most policy actions are discretionary in nature.