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Powell Says Certainly Plausible That Neutral Rate Currently Higher Than Longer-Run Rate

FED
  • Q: What does the same forecast inflation rate for next year but need another 0.5bp of hikes? Does it mean the FOMC sees need for more medicine? At what point do you think the longer-run rate is actually higher?
    • A: Rather than pointing to a sense that inflation has become more persistent - that's not something that's appeared in the recent data, it's more about stronger econ activity, and stronger activity means we have to do more with rates.
    • Re the neutral rate: we only know by how the economy reacts and are moving carefully here because there are lags here. It may be that it has risen - you do see people raising their estimates - it's certainly plausible that the neutral rate at this moment is higher than the longer-run rate in the SEP.

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