"Insider Predicts Higher 'Neutral' Rate as Fed Prepares for Next Move"

The Wall Street Journal's Nick Timiraos predicts that the Federal Reserve will raise interest rates in the future, despite the current resilient state of the economy. The neutral rate of interest, which represents the hypothetical interest rate at which the economy operates at its full potential, is a key factor in this prediction. While the median estimate of the neutral rate has remained at 0.5%, some officials' estimates have been increasing. Factors such as productivity growth, demographics, risk appetite, and global factors can influence the neutral rate. The Federal Reserve pays attention to estimates of the neutral rate to determine whether monetary policy should be contractionary or expansionary.