GSY - Has The Neutral Rate Of Interest Increased?
2024-07-19 09:52:00 ET
Summary
- The Federal Reserve is widely expected to start cutting interest rates at the Sep. 18 FOMC meeting, but the debate is turning to how far the central bank will trim its policy rate once the easing begins.
- The true neutral rate is unobservable, and so economists can only estimate it with models.
- It’s premature to conclude that the natural rate of interest has materially increased, but to the extent that a sharp increase in real rates is a factor – and it is – then it’s fair to assume that Fed’s capacity for cutting rates may be narrower than recently assumed.
The Federal Reserve is widely expected to start cutting interest rates at the Sep. 18 FOMC meeting, but the debate is turning to how far the central bank will trim its policy rate once the easing begins? A key part of the answer will be determined by how much the neutral rate has increased, if at all, in recent years....
Has The Neutral Rate Of Interest Increased?