Aug
20

Lower Level

slow1Since 1947 real GDP growth has averaged 3.26%/year. Since 1/1/10 it’s averaged 2.3%. Economists think that some of the decline will persist for a while because of both slower productivity gains and population growth. Therefore, the neutral Federal Funds rate, the rate that’s neither expansionary nor contractionary and the rate the Fed wants to ultimately raise Federal Funds to, has probably fallen from 4.25% to 3.5%. It’s now 0%.

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