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Chair Powell Elaborates On His View Of the Neutral Rate

FED
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  • Q: Could you elaborate on your current view of the neutral rate?
    • A: It's a very important variable in the way we think about monetary policy, but you can't identify it with precision in real time. Within a range of estimates of the neutral rate, policy is restrictive. There's not any debate or attempt to agree as a group on whether R* has moved or not - ultimately it's unknowable. We're focused on looking at the data, and giving ourselves more time, and being careful in our moves. Years from now economists will be revising their estimates of where R* was on Nov 1, 2023. We can't really wait for that in making policy.
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  • Q: Could you elaborate on your current view of the neutral rate?
    • A: It's a very important variable in the way we think about monetary policy, but you can't identify it with precision in real time. Within a range of estimates of the neutral rate, policy is restrictive. There's not any debate or attempt to agree as a group on whether R* has moved or not - ultimately it's unknowable. We're focused on looking at the data, and giving ourselves more time, and being careful in our moves. Years from now economists will be revising their estimates of where R* was on Nov 1, 2023. We can't really wait for that in making policy.