Fed meeting today: Fed decides on aggressive 50 basis-point cut in interest rates. Powell to speak soon.
What is the ideal rate of interest for the U.S. economy? The Fed lifted its so-called neutral rate to 2.9% from 2.8%.
The neutral rate is supposed to be the level of interest rates that neither makes the economy grow faster nor makes it grow slower.
At this rate, the economy is expanding at its true potential and everyone who wants a job has one – aka full employment.
In other words, economic nirvana.
No one really know what the true neutral rate is, and it changes over time. But 2.9% is the Fed’s best current guess.