One neutral rate estimate suggests Fed’s policy stance is accommodative, paper says

The San Francisco Fed has published research suggesting that the Federal Reserve's current policy rate is likely accommodative, based on a medium-run estimate of the neutral rate. This finding contrasts with most U.S. central bank policymakers, who believe the current policy is restrictive or neutral. The research suggests that using a longer-run neutral rate estimate may lead to less optimal economic outcomes than rules based on a medium-term estimate.

The analysis indicates that monetary policy using this measure could stabilize inflation and achieve maximum employment more effectively than standard benchmarks. However, the uncertainty surrounding this estimate remains high.

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