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Wednesday, February 12, 2025

Lawler: More Ruminations on the “Neutral” Rate of Interest

by Calculated Risk on 2/12/2025 12:34:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: More Ruminations on the “Neutral” Rate of Interest

A brief excerpt:

When talking about the so-called “neutral” interest rate, many financial commentators, financial analysts, and even monetary policymakers talk about the nominal interest rate. However, the theoretical “neutral” interest rate is a real, or inflation-adjusted interest rate.
...
In sum, (1) the market’s view of the neutral fed funds rate is higher than the majority of FOMC participants; and (2) using implied market expectations the current stance of monetary policy is not meaningfully restrictive.
There is much more in the article.