According to Odaily Planet Daily, Nick Timiraos' latest article points out that in the debate about whether and when the Federal Reserve will cut interest rates, another important debate is unfolding: where will interest rates go in the long run? The key to the problem lies in the neutral interest rate, that is, the interest rate that can balance the supply and demand of savings while ensuring economic growth and inflation stability. Some people now believe that the neutral interest rate has reason to rise and may change a wide range of asset prices. However, the current debate about the neutral interest rate may not have any short-term impact on the Federal Reserve because the current interest rate is higher than almost all estimates of the neutral interest rate.
If the U.S. economy continues to be strong and inflation is stubborn, it could lead to speculation that the neutral rate is rising, making current rates less tight. Alternatively, if inflation resumes its downward trend, the discussion about the neutral rate will focus on the extent of the Fed's subsequent rate cuts. Interest rate futures show that the Fed funds rate will stabilize around 4% in the next few years.