• AI investment could lead to a higher neutral rate
  • Recent policy changes, including immigratio, have produced fast changes in the neutral rate
  • Current Fed policy is more restrictive than people think because the neutral rate has fallen
  • Difference with policy views of collegues is more based on speed of cuts than destination
  • He has a more sanguine view of inflation, mostly due to expectations about housing costs

Earlier today, Fed’s Miran emphasized the uncertainty surrounding the neutral rate, noting that it remains difficult to pinpoint precisely and that this ambiguity complicates policy decisions. He said that while the neutral rate’s exact level is unclear, the ongoing debate about how it has evolved is both valid and necessary. Miran underscored that the economy has become more vulnerable to shocks as monetary policy remains restrictive, and that the key difference in his perspective from other FOMC members lies in how quickly the Fed should move back to a more neutral stance.

Source: Investing Live