trending Market Intelligence /marketintelligence/en/news-insights/trending/tIDJvwCQ54_X4qZ8aPABrQ2 content esgSubNav
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us
In This List

Brainard: Low US neutral rate may raise risk of elevated asset prices

Blog

So, the data lakehouse is now officially a ‘thing’ – what is it and why should you care?

Blog

Industry Top Trends 2021: Oil and Gas

Blog

Charter, DIRECTV and Comcast rank as the top 'RSN-friendly' MVPDs

Industry Top Trends 2021: Metals and Mining


Brainard: Low US neutral rate may raise risk of elevated asset prices

Federal Reserve Governor Lael Brainard said extended periods of a low U.S. neutral interest rate may increase the risk of asset bubbles.

At a monetary policy conference in Washington, D.C., Brainard remarked that the U.S. economy has entered into a so-called "new normal," or a period where the neutral interest rate is much lower than decades past. The neutral interest rate is level of the federal funds rate that best contributes to the economy growing at its optimal level, with full employment and stable inflation.

The low level of the neutral interest rate creates several problems, according to Brainard. First, the Fed cannot use interest rates cuts as much to combat a hurting economy. Second, the low neutral federal funds rate may be a factor contributing to U.S. inflation undershooting the Federal Open Market Committees's 2% target. Lastly, an extended low neutral rate period may increase the risk of elevated asset prices, with higher price-to-earnings ratios for stocks.

Brainard is a voting member of the FOMC.