Interest rate neutral zone

Discussion in 'Economics' started by independenceair, Feb 19, 2006.

  1. What does the term NEUTRAL imply in regards to interest rates'
    effect on the economy- does that mean the rates will have to go to 5.25 before they have the desired results ? :confused:
  2. Neutral?...........It ought to mean no change in rates for the near future. Consider buying deferred EuroDollar or Fed Funds futures.
  3. When they talk about neutral interest rates they are referring to a rate that does not promote nor restrict expansion of the economy.

    Obvioulsy there is no way to know what this rate is and since they make a decision every 6 weeks while the effect of those decisions takes months to filter through the economy they will most likely overshoot the neutral zone.