Powell Says Fed Is ‘Meaningfully Above’ Long-Term Neutral Rate

Federal Reserve Chair Jerome Powell said the central bank still has a ways to go in reducing its benchmark interest toward its longer-run level.

“I would say we are meaningfully above it,” Powell said Wednesday, referring to the so-called neutral rate, which doesn’t stimulate nor restrict economic activity. “I have no illusion anyone knows precisely what that is.”

Powell earlier said the central bank can be patient with its approach to modifying interest rates, arguing that policy is currently well-positioned to deal with risks to inflation and the labor market.

Officials unanimously decided keep the federal funds rate in a range of 4.25%-4.5% after three consecutive cuts to close out 2024.

“With our policy stance significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” he said.