The natural rate of interest foretells US fiscal doom


Briefly, using the neutral rate as a starting point for setting the Federal Reserve’s (Fed) policy rate is unhelpful. — Bloomberg

THE idea of a “neutral” or “natural” rate of interest looms over discussions of US monetary policy.

Whether it’s any help in setting the course of monetary policy is questionable. Yet there’s no doubt it belongs at the centre of a different, equally important discussion – on the sustainability of public debt.

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