Abstract:This paper estimates the forwardlooking, backwardlooking and hybrid Taylor Rule’s reaction function, and then respectively tests the three different Taylor Rule from two aspects of market interest rate and regulated interest rate. The result shows that the forwardlooking Taylor Rule reaction function can describe the specific path of interest rates in China better. Market interest rate can represent the characteristic of countercyclical regulation in monetary policy better. So, the central bank should further strengthenforwardlooking in regulation when setting the monetary policy. Meanwhile, the government should promote the market reform on interest rate steadily, which is conducive to economic restructuring and promoting transformation and upgrading of China’s economy.