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Why The Fed May Need To Go To 6%
Interest-rate traders reckon that the Federal Reserve won’t have to raise rates again in this cycle. They may be wrong. Here are some reasons why. The short-term real neutral rate that underpins the US economy will reach 2.5% by the end of this year, according to researchers at the New York Fed. Given that average PCE inflation hit 3.7% in the second quarter, the Fed may be forced to tighten its policy benchmark to at least 6%. The findings also suggest that the Fed will find it hard to cut interest rates as the market widely expects should the neutral rate remain sticky. In that case, higher for longer may indeed ... (full story)