A Different Perspective on Fed Tightening

From cmegroup.com Watch this video at https://www.forexfactory.com/news/1179738-a-different-perspective-on-fed-tightening.

The Fed has been raising short-term interest rates from near zero during 2022, with guidance that more hikes are to come. Should we call this a “tightening” of monetary policy? No, not really, at least not yet. It’s better to refer to what is happening in 2022 as a withdrawal of accommodation that helped create the inflation we are experiencing. The Fed has not yet pushed short-term rates into what most economists would deem as “neutral” territory. The definition of “neutral” monetary policy is a little slippery. The “neutral” rate is thought to reside at a level that equals or slightly exceeds longer-term inflation expectations. With long-term inflation expectation probably in the 3% territory, the Fed would not get to “neutral” until short-term rates were raised to more like 3.5% or so.