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The Fed’s Road to Full Normalization
With inflation still well above the U.S. Federal Reserve’s target and the unemployment rate now below estimates for the long-run maximum level, the Fed reiterated recent guidance following its January meeting: Officials expect to hike the policy rate in March, kicking off a series of four rate hikes in 2022. Although the Fed’s near-term rate trajectory indicates a sooner and more rapid rise in response to inflationary risks, we haven’t changed our expectation that a still-low neutral rate, larger central bank balance sheet, and generally higher economy-wide debt levels will keep the terminal level of this rate ... (full story)