The K-Percent Rule (associated with economist Milton Friedman) is a monetarist policy prescription that suggests central banks should increase the money supply at a constant, predetermined annual rate “k,” rather than reacting to economic ups and downs.
Under this rule, the growth of money supply would align with the long-term growth rate of real Gross Domestic Product (GDP), helping avoid abrupt changes that might cause inflation or recessions.
Because the rule is rigid (i.e. central banks cannot adjust it in response to short-term economic fluctuations), critics argue it lacks flexibility for crises or sudden shocks.
