FOMC Pivots to Holding Rates Steady: Real vs. Nominal Policy Rate Matters for Inflation
By
Joseph Tracy
8d ago· 4 min readenInsight
Summary
The Federal Open Market Committee (FOMC) has shifted from considering further near-term policy rate cuts to holding its nominal policy rate steady while assessing incoming data. The key insight for calibrating monetary policy is that what matters for inflation is not the Fed's nominal policy rate, but the real policy rate. Joe Tracy explains this distinction, referencing Professor John Taylor's advocacy on the topic.
Source
bskyFOMC Pivots to Holding Rates Steady: Real vs. Nominal Policy Rate Matters for Inflationbusiness.purdue.eduKey quotes
· 3 pulledThe Federal Open Market Committee (FOMC) appears to have made a pivot away from further near-term policy rate cuts to holding its nominal policy rate fixed while assessing the data as it comes in.
An important point for calibrating monetary policy is that what matters for inflation is not the Fed's nominal policy rate but the real policy rate.
What matters for inflation is not the Fed's nominal policy rate but the real policy rate, explains Joe Tracy.
What matters for inflation is not the Fed’s nominal policy rate but the real policy rate, explains Joe Tracy.
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