TIP - Larry Summers Says There's Still A 'Real Possibility' Of A Fed Move Higher: 'Would Be An Inappropriate Act To Cut Rates' At June Meeting | Benzinga
The stock market largely took a stronger-than-expected March job report in stride, but an economist warned on Friday that the data could dampen hopes of rate cuts.
Neutral Rates: The U.S. payrolls gain in March suggests the economy is re-accelerating, said former Treasury Secretary Lawrence Summers in a Bloomberg interview last week. Considering other factors such as the “epic” loosening in financial conditions, “it seems to me the evidence is overwhelming that the neutral rate is far higher than the Fed supposes,” he said.
A neutral monetary policy rate is one which is neither stimulatory nor restrictive to growth.
The median estimate for the neutral policy rate issued by Fed officials following the March meeting was 2.6%, while Summers estimated it be at 4% or higher. The Fed funds rate is currently at a 22-year high of 5.25%-5.50%. Summers, a professor at Harvard University, suggested that the ...