A Rising Star — Fed Raises Projections for Long Term Fed Funds Rate

June 17, 2024 — The interest rate environment over the past nine months has resembled a pendulum as markets (and Fed officials themselves) attempt to shift from a hiking to an easing regime, normalizing the federal funds rate closer to the long-term neutral target. As we wrote in last week’s note, the Fed faces a conundrum of normalizing interest rates from the current 5.5% upper bound to their neutral target while tempering the threat of inflation.