Fed Model Says `Neutral' Interest Rate Dips Back to Zero: Chart
(Bloomberg) -- The so-called neutral U.S. interest rate fell in the final three months of 2016, according to a widely-cited estimate produced by Fed economist Thomas Laubach and San Francisco Fed President John Williams. The theoretical rate -- which is adjusted for inflation and would neither stimulate nor restrict an economy growing on trend -- declined to roughly zero from 0.2 percent. The drop, which reverses a slightly rising trend in the last three quarters, suggests the Fed may not be providing as much stimulus as officials previously thought. Its benchmark rate, adjusted for core inflation, is currently -0.8 percent.