IDEAS home Printed from https://ideas.repec.org/a/fip/fedkeb/96406.html
   My bibliography  Save this article

To Reach the Fed’s Inflation Target, Interest Rates May Have to Remain Restrictive for Some Time

Author

Abstract

The Federal Reserve has raised the federal funds rate by 500 basis points since March 2022. But how tight is the current policy stance? We account for the federal funds rate, inflation expectations, and the natural rate of interest and find that monetary policy has only been restrictive since 2023:Q1. We find that to bring inflation down to 2 percent, the Federal Reserve may have to keep the federal funds rate in restrictive territory for some time.

Suggested Citation

  • Johannes Matschke & Sai Sattiraju, 2023. "To Reach the Fed’s Inflation Target, Interest Rates May Have to Remain Restrictive for Some Time," Economic Bulletin, Federal Reserve Bank of Kansas City, pages 1-4, June.
    • Handle: RePEc:fip:fedkeb:96406
    as

    Download full text from publisher

    File URL: https://www.kansascityfed.org/Economic%20Bulletin/documents/9640/EconomicBulletin23MatschkeSattiraju0629.pdf
    File Function: Full Text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christina D. Romer & David H. Romer, 2023. "Presidential Address: Does Monetary Policy Matter? The Narrative Approach after 35 Years," American Economic Review, American Economic Association, vol. 113(6), pages 1395-1423, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Forbes, Kristin & Ha, Jongrim & Kose, M. Ayhan, 2024. "Rate Cycles," CEPR Discussion Papers 19272, C.E.P.R. Discussion Papers.
    2. Johannes Matschke & Alice von Ende-Becker, 2024. "Current Monetary Policy May Be Less Restrictive Than It Seems," Economic Bulletin, Federal Reserve Bank of Kansas City, pages 1-4, May.
    3. John Cochrane, 2024. "Expectations and the Neutrality of Interest Rates," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 53, pages 194-223, July.
    4. Bernoth, Kerstin & Herwartz, Helmut & Trienens, Lasse, 2024. "Interest Rates, Convenience Yields and Inflation Expectations: Drivers of US Dollar Exchange Rates," VfS Annual Conference 2024 (Berlin): Upcoming Labor Market Challenges 302351, Verein für Socialpolitik / German Economic Association, revised 2024.

    More about this item

    Keywords

    federal funds; inflation; interest rates;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedkeb:96406. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Zach Kastens (email available below). General contact details of provider: https://edirc.repec.org/data/frbkcus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.