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Fed officials dismiss near-term prospects for neutral interest rates in US
Senior Federal Reserve officials have expressed skepticism about the likelihood of the United States reaching a point where interest rates are neutral. Research from the New York and San Francisco regulators says there is only a 9% chance that borrowing costs will go down to zero over the next seven years.
Fed's John Williams cites geopolitical tensions as the main cause for such rate dynamics, warning of sustained monetary policy risks. Global instability remains the primary rate driver, he noted, backing research findings.
The study, which analyzed interest rate derivatives, including the overnight rate closely tied to federal funds, paints an even gloomier short-term outlook. The odds of hitting neutral rates in two years are slim, e.g. 1%, Fed representatives comment.
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