The Neutral Rate of Interest

Several Fed policy-makers are focusing their comments and analyses on the neutral rate of interest – a level of the real (inflation-adjusted) Fed funds rate that will neither slow down nor speed up the economy.  If the Fed funds were set at this level, inflation and unemployment would be stable.  The neutral rate changes depending on economic conditions and is ultimately unknown. Despite the measurement problems, it is useful in setting and evaluating monetary policy.

See more at: http://www.indexologyblog.com/2015/12/02/the-neutral-rate-of-interest/

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