Sliding U.S. Inflation Pushes Fed Rates Above Neutral: Chart

Sliding U.S. Inflation Pushes Fed Rates Above Neutral: Chart

(Bloomberg) -- The Federal Reserve’s benchmark interest rate is now above policy makers’ median estimate of the so-called neutral level in inflation-adjusted terms, based on data from the latest government report on prices published Monday. The price index for U.S. personal consumption expenditures excluding food and energy, which the Fed watches closely as it assesses underlying inflationary pressures, rose a below-forecast 1.6 percent in the year through March, according to the Commerce Department. That put the current real federal funds rate slightly above the neutral estimate of about 0.75 percent, and if the inflation shortfall persists, the argument for cutting the target rate may gain more traction.

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