Search
 
News

The Fed’s Long-Sought ‘Neutrality’ Is a Moving Target

Some think that the short-term definition of “neutral” should be higher than the Fed’s long-term estimate of 2.5 percent.

By Steve Matthews & Sarina Yoo | September 07, 2022 at 09:48 AM
The seal of the US Federal Reserve. Photographer: Graeme Sloan/Bloomberg Photographer: Graeme Sloan/Bloomberg

A shift is underway at the Federal Reserve in how to describe “neutral”—the interest rate level that neither stimulates nor restrains growth—as the agency debates how much higher to hike rates.

“Neutral” is an abstract concept, yet the stakes for setting it correctly are high: If the assessment of what rate is “neutral” is too low, Fed policy could provide too much stimulus to the economy as it fights inflation. If it’s too high, policy will be more restrictive than planned. Either could result in a damaging policy error.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

NOT FOR REPRINT

© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

 

Recommended Stories

Inflation and Labor Are Cooling

Inflation and Labor Are Cooling

Augusta Saraiva |

Fed rate hikes are on hold for now, but some think inflation and the soft job market will lead to cuts in the near future.

Global Bonds Power Ahead

Global Bonds Power Ahead

Rita Nazareth |

Dovish bets take hold, with soft economic readings in both the U.S. and Europe fueling speculation that central banks will cut rates in 2024.

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2023 ALM Global, LLC. All Rights Reserved.