Why the Neutral Interest Rate Cannot Be Established

Most commentators are of the view that what prevents the attainment of price stability is the deviation of the policy interest rate, such as the federal funds rate, from the neutral interest rate, also known as the natural interest rate. The neutral interest rate, it is held, is the one that is consistent with stable prices and a balanced economy. According to this view, what is required is for Fed policymakers to successfully direct the federal funds rate toward the neutral interest rate.