Fed Chair Powell (Q&A) says cannot know the neutral rate with certainty
- Says we are in a reasonable range for the neutral rate, the higher end
- Labour market is still cooling off a little bit
- No case for policy to be meaningfully restrictive - maybe mildly restrictive or neutral is appropriate
Context
Fed Chair Powell's remarks suggest that the Fed still sees the neutral rate as uncertain, indicating they might not prioritize aggressive tightening in the near term. His emphasis on a mildly restrictive stance implies limited immediate rate hikes, which may support the USD in the short-term but leaves the door open for shifts depending on labor market developments.
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