Current policy may be accommodative if inflation is 2.5 percent or higher, Nick Timiraos suggests

Current policy may be accommodative if inflation is 2.5 percent or higher, Nick Timiraos suggests
SF Fed economist sees 1.5 percent neutral rate

Nick Timiraos, chief economics correspondent at Wall Street Journal, reports that a new estimate by an economist at the San Francisco Federal Reserve puts the medium-run neutral interest rate at around 1.5 percent, though with significant uncertainty around that number.

Timiraos notes that if underlying inflation is assumed to be at least 2.5 percent, this implies current U.S. monetary policy is accommodative.

Recent data covered by Timiraos showed the core Consumer Price Index rose 0.22 percent in July, bringing the annual core inflation rate to 2.5 percent, according to previous reports. Earlier, Philadelphia Fed President Anna Paulson expressed support for steady monetary policy while remaining open to changes, as reported by Timiraos. These developments provide context for ongoing discussions about the stance of U.S. monetary policy.

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