AmiSight 10/4: There’s a Star the Federal Reserve Is Chasing
I recently read a fascinating article about how the Federal Reserve looks for its R-star, or "neutral interest rate."
The term dates back to 1898, when Swedish economist Knut Wicksell wrote: “There is a certain rate of interest on loans which is neutral in respect to commodity prices and tends neither to raise nor to lower them.”
In other words, there’s a Goldilocks interest rate out there. One that isn’t so low that it ushers in inflation yet not so high that it tips the economy into a recession.