Will the Fed soften its rate hike path?

clock • 2 min read

US Fed chairman, Jerome Powell, recently described the conventional approach to setting US interest rates as "navigating by the stars".

So developments in the economy are assessed in relation to their long-run, neutral or normal levels to provide a signal for interest rates. For example, the long-run potential growth rate of the economy, is termed y*; the natural rate of unemployment is termed u*; the long-run real rate of interest is r*; and π* is the inflation objective. Farewell dear Janet: End of an era at the Federal Reserve These star values are not like those used by ancient navigators. This is evident from the changing median estimates of their values in the Fed's Summary of Economic Projections. The est...

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