U.S. Fed faces challenge in pinning "neutral" rate amid monetary tightening: report
NEW YORK, April 26 (Xinhua) -- The U.S. Federal Reserve may scramble in finding where to stop at a "neutral" rate, which is neither accommodative nor restrictive to economic activities, in this round of monetary tightening, according to a recent report by the Wall Street Journal.
Even in normal times, no one knows where this theoretical rate is and the neutral rate may be higher than Fed officials' recent estimate, taking into account elevated inflation, said the report.
A number of Fed officials said the federal fund rate should go up to the "neutral" level by the end of 2022, which is believed to range from 2.25 percent to 2.5 percent.
According to the minutes of a Federal Open Market Committee meeting in mid-March, participants judged that "it would be appropriate to move the stance of monetary policy toward a neutral posture expeditiously."
"The Fed only knows where neutral is in retrospect," said the report, quoting Steven Blitz, chief U.S. economist at research firm TS Lombard.
"I doubt that anyone can say with confidence where neutral is," said Mohamed El-Erian, chief economic adviser of German multinational financial services company Allianz SE.
The Fed kicked off hiking of the federal fund rate by 25 basis points to the range of 0.25 percent to 0.5 percent in March, after keeping the benchmark rate as low as zero following the outbreak of COVID-19 in early 2020.
Photos
Related Stories
- Government documents show U.S. CDC delays disclosing likely COVID-19 animal spillover event
- Pandemic, juvenile crime, gun trafficking leads to murder surge in the U.S.: report
- Biden nominates new U.S. ambassador to Ukraine
- Fights, untruths and politicization of science prevail U.S. amid COVID-19 pandemic: opinion
- Russia asks U.S. to stop arming Ukraine
Copyright © 2022 People's Daily Online. All Rights Reserved.