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Fed Chair Jerome Powell Says Policy May Be Near Neutral Range

Jerome Powell said the federal funds target range is 3.5% to 3.75%, with the neutral rate likely between 3% and 4%, and said the Federal Reserve would signal any future rate hikes.

Summary

Federal Reserve Chair Jerome Powell said U.S. monetary policy may now be in a neutral range, indicating interest rates are close to a level that neither stimulates nor restrains economic activity. He said the neutral rate is likely between 3% and 4%, while the current federal funds target range stands at 3.5% to 3.75%. Powell also said the Federal Reserve would signal any future rate hikes, underscoring the importance of forward guidance for financial markets, including risk assets such as cryptocurrencies.

Terms & Concepts
  • Neutral rate: The interest rate level that neither boosts nor slows the economy, often used to judge whether monetary policy is accommodative or restrictive.
  • Federal funds target range: The policy range set by the Federal Reserve for overnight lending between banks, which influences broader borrowing costs across the economy.
  • Forward guidance: Central bank communication about the likely path of future policy, used to shape market expectations.