This paper studies two roles that long-term nominal interest rates can play in the conduct of monetary policy in a New Keynesian model. The first allows long-term rates to enter the reaction function of the monetary authority. The second considers the possibility of using long-term rates as instruments of policy. It is shown that in both cases a unique rational expectations equilibrium exists. Reacting to movements in long yields does not improve macroeconomic performance as measured by the

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... function. However, long-term rates turn out to be better instruments when the relative concern of the monetary authority for inflation volatility is high. * I am indebted to Peter Ireland for his help and support. I also wish to thank, Pierluigi Balduzzi,