neutral interest rate

Reuters' Morning Bid column argues that the Federal Reserve's evolving estimate of the neutral interest rate — the level that neither stimulates nor restrains the economy — looks much like the decades-old consensus, despite talk of a structurally higher rate. Markets are parsing Fed guidance for clues on how far and fast borrowing costs might eventually fall.

Oil prices holding above $100 a barrel are prompting central banks to reconsider their estimates of the neutral interest rate — the level that neither stimulates nor restricts the economy. Sustained energy costs keep inflation elevated, which could mean rates need to stay higher for longer than previously assumed.