Interest rate neutral zone

[independenceair]

What does the term NEUTRAL imply in regards to interest rates'
effect on the economy- does that mean the rates will have to go to 5.25 before they have the desired results ?

 

[nazzdack]

Neutral?...........It ought to mean no change in rates for the near future. Consider buying deferred EuroDollar or Fed Funds futures.

 

[futures_shark]

When they talk about neutral interest rates they are referring to a rate that does not promote nor restrict expansion of the economy.

Obvioulsy there is no way to know what this rate is and since they make a decision every 6 weeks while the effect of those decisions takes months to filter through the economy they will most likely overshoot the neutral zone.