Federal Reserve Target Rate Remains Close To Neutral

2025-02-10 12:50:00 ET

Summary

• The Federal Reserve in last week’s policy meeting left interest rates unchanged at a 4.25%-4.50% range, and a repeat performance appears likely at the next meeting on Mar. 19.
• TMC Research’s Fed funds model currently estimates a neutral rate at 4.13% (Feb. 4), or just 20 basis points below the current 4.33% effective Fed funds (EFF) rate.
• The recent decline in the spread highlights the change of monetary policy that previously was substantially tight to what has become at/near a neutral stance.

Originally published on February 6, 2025

By James Picerno

The Federal Reserve in last week’s policy meeting left interest rates unchanged at a 4.25%-4.50% range, and a repeat performance appears likely at the next meeting on Mar. 19, according to TMC Research’s Fed funds model....

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