Fed economists estimate natural rate still at rock bottom
Analysis implies policy rate is firmly in restrictive territory and may not remain high
The natural rate of interest in the US remains low and may even be negative in the short term, analysis by Federal Reserve economists finds.
Estimating the natural rate – the rate that is neither expansionary nor contractionary – is famously an imprecise science. But new analysis on the rate’s decline by Dallas Fed senior economist Enrique Martínez García echoes similar findings by New York Fed economists. If they are right, it implies the federal funds rate is firmly in restrictive territory
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