” With the U.S. economy at full employment and inflation at the Federal Reserve’s 2 percent goal, the U.S. central bank should press on with its plan for gradual interest rate hikes at least for the next nine to 12 months, a policymaker said on Tuesday.
Only once short-term rates reach a “neutral” level where they are neither stimulating nor braking the economy should the central bank potentially stop raising rates and figure out what to do next, Dallas Fed President Robert Kaplan said in an essay.
Neutral, he said, is somewhere between 2.5 percent and 2.75 percent.
“It would take approximately three or four more federal funds rate increases of a quarter of a percent to get into the range of this estimated neutral level,” Kaplan wrote in the essay, which was published by the Dallas Fed. ”
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