Plummeting Inflation Raises New Risk for Fed: Rising Real Interest Rates
If inflation has sustainably returned to the Fed’s 2% target, then nominal rates adjusted for inflation have risen and might be restricting economic activity too much.
Nick Timiraos WSJ 28 January 2024
Mortgage Rates in the US Jump to a Two-Month High of 6.77%
Bloomberg 15 February 2024
Inflation presents ever less of an obstacle to cutting rates
The question is whether there is any pressing need to do so, as the economy appears to be humming along beautifully with rates where they are.
One argument for cutting, given some extra fuel by a Wall Street Journal analysis over the weekend, is that falling inflation automatically raises real rates (the amount by which rates exceed inflation).
This, many would say, is the key measure of how tight financial conditions truly are, and would tend to suggest that rates already look excessive.
On the other hand, as economists like to say,
if inflation returns to 2 percent, the real rate on new loans will be 5 percent for many years.
Englund blogg 16 augusti 2023
https://englundmacro.blogspot.com/2023/08/us-homeowners-now-pay-around-7-percent.html
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