Fed Rate Suggests Accommodative Policy Stance

The Federal Reserve's current policy rate is likely accommodative according to research published by the San Francisco Fed. The study used a medium-run estimate of the neutral rate, which measures the rate at which borrowing costs are neither slowing nor boosting the economy.

The conclusion contrasts with most U.S. central bank policymakers who believe that policy is restrictive or possibly neutral. However, using this metric to assess monetary policy could result in more effective stabilization of inflation and achievement of maximum employment.

Vasco Curdia, a research advisor at the San Francisco Fed, wrote that 'analysis suggests that monetary policy using this measure could stabilize inflation and achieve maximum employment more effectively than standard benchmarks.'