There’s a lot of talk these days about the so-called “neutral” (or “natural” or “terminal”) interest rate projections of the Federal Reserve. In fact, their projection of this number is a key argument in their ongoing decision to keep rates at historically very-low levels for what has been an extended period of time. (Specifically, Federal Reserve officials have argued that the neutral interest rate has sharply declined in recent years, meaning that apparently ultra-low interest rates do not really signify easy monetary policy.) What is this neutral rate? The neutral rate, it is argued, is simply the federal funds rate…
Mark Spitznagel – What Is This "Neutral" Interest Rate Touted By The Fed?
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