“at some point this year.” - Interest Rates Are Both Too High and Too Low

Short-term rates are sharply higher. 

Long-term rates are steadier. 

What’s a central bank to do?

The Federal Reserve is still aiming to lower interest rates later this year, and for many U.S. households and small businesses those rate cuts can’t come soon enough. 

But for big companies able to tap the corporate bond market, and for investors riding a rising stock market, relief from the Fed doesn’t seem all that necessary.

Fed Chair Jerome Powell again characterized the level of rates as “restrictive,” and said that “it will likely be appropriate to begin dialing back policy restraint at some point this year.” 

The idea that the Fed’s target rate is restrictive is driven by a variety of models, many of them versions of the Taylor rule. Three versions of the rule calculated by the Atlanta Fed suggest the Fed’s target rate should now be 3.9% to 4.7%.

But long-term interest rates aren’t nearly as elevated relative to before the pandemic as the overnight rate the Fed targets.

The yield on the 10-year Treasury note has lately been at around 4.3%. While higher than before the pandemic, historically that isn’t very high—and it is significantly lower than the 5% it touched last fall.

One place where long-term rates still seem high is the one that matters most to many households: Mortgage rates are much higher than before the pandemic, and the spread between them and Treasury yields has widened. High mortgage rates have locked many renters out of homeownership. 

Justin Lahart Wall Street Journal 21 March 2024 

https://www.wsj.com/economy/central-banking/the-feds-conundrum-interest-rates-are-both-too-highand-too-low-f05a9d3a

When I first developed the Taylor rule, which has been widely discussed for three decades now, I based it on an average inflation rate

A decade ago, I wrote a paper with John C. Williams, now the president of the Federal Reserve Bank of New York, titled “Simple and Robust Rules for Monetary Policy,” in which we emphasized the importance of rules-based policymaking

John B. Taylor Project Syndicate 16 October 2020

https://englundmacro.blogspot.com/2020/10/whos-afraid-of-rules-based-monetary.html,

Tre tunga USA- ekonomer: ekonomin går så starkt att Fed kanske inte kan sänka räntan i år

Torsten Slok är inte ensam om att varna för att styrräntan kan bli kvar på nuvarande nivå resten av året. 

Samma linje drev Mark Okada, grundare och partner på investeringsfirman Sycamore Tree, i en intervju med tv-kanalen CNBC förra veckan där han flaggade för att det finns risk att Fed inte kan sänka alls i år på grund av den starka ekonomin.

Felicia Åkerman DI 22 mars 2024