Federal Reserve Governor Michelle Bowman said the neutral level for the central bank’s policy rate had likely risen since the Covid-19 pandemic.
Bowman said several factors that prevailed immediately after the pandemic’s onset, such as low borrowing costs and supportive fiscal policy, had allowed the US economy to remain on mostly solid footing even after the Fed aggressively raised interest rates in 2022 and 2023.
Those same factors, she said, likely led to a rise in the so-called neutral rate — the Fed policy level that neither promotes nor restricts economic activity. Economists refer to this level as R-star.
Ellen Zentner, Chief Economic Strategist for the Morgan Stanley Global Investment Office, explains why Friday's jobs report and recent US inflation data won't push the Fed cut interest rates in the near-term, even with a recent dip in personal spending. Ellen speaks with Tom Keene and Paul Sweeney on Bloomberg Radio. (Source: Bloomberg)
