Why the Federal Reserve is split on the future of interest rates
https://www.economist.com/finance-and-economics/2024/09/26/why-the-federal-reserve-is-split-on-the-future-of-interest-rates
My take from June 2024:
https://thehill.com/opinion/finance/4701798-the-fed-needs-to-set-a-higher-target-for-long-term-interest-rates/
Confusion surrounding the future path of short-term policy rates (partly a result of Fed’s data-dependent approach) has contributed to recent fluctuations in market rates. Additionally, the failure of the Fed to recognize and highlight underlying structural shifts in the post-pandemic era is causing persistent market mispricing of equilibrium rates and term premia.
Deglobalization and trade fragmentation, explosive growth in public debt, demographic shifts highlighted by a rapidly aging population, revival of labor’s bargaining power, expensive green transition to deal with climate change, and the AI-led investment spike are all factors that are likely to generate persistently higher neutral interest rates.
https://www.economist.com/finance-and-economics/2024/09/26/why-the-federal-reserve-is-split-on-the-future-of-interest-rates
https://thehill.com/opinion/finance/4701798-the-fed-needs-to-set-a-higher-target-for-long-term-interest-rates/
Confusion surrounding the future path of short-term policy rates (partly a result of Fed’s data-dependent approach) has contributed to recent fluctuations in market rates. Additionally, the failure of the Fed to recognize and highlight underlying structural shifts in the post-pandemic era is causing persistent market mispricing of equilibrium rates and term premia.
Deglobalization and trade fragmentation, explosive growth in public debt, demographic shifts highlighted by a rapidly aging population, revival of labor’s bargaining power, expensive green transition to deal with climate change, and the AI-led investment spike are all factors that are likely to generate persistently higher neutral interest rates.