Neutral rate range goes to 3.5% – Fed's Quarles

Economy 12/3/2018, 5:32 PM
Neutral rate range goes to 3.5% – Fed's Quarles

The Federal Reserve's vice chair for supervision told participants at an event organized by the Council on Foreign Relations that economic trends show policymakers are "doing a pretty good job" in preventing the inflation from getting out of hand and stimulating job growth. Speaking on Monday, Randal Quarles acknowledged Jerome Powell, the head of the central bank of the United States, has said the benchmark interest rate is "just below" the bottom range of where they suggest the neutral level is, but stressed the estimate is from 2.5% to as high as 3.5%. The Fed chair noted last week that the range is "broad."

It isn't clear how much more borrowing costs would be lifted, the rate-setter warned and pointed to the significance of incoming macroeconomic data and the "assessment of the performance of the economy over the next year." The debate on neutral can "cloud communication" given the uncertainty over where the exact level is, Quarles asserted. The Fed won't make decisions according to every "twist" in the news, the top supervisor claimed and added the markets "understand" its strategy.

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