Investment insights | Fed | Monetary policy Could the Fed cause the next recession?

After six rate hikes over a period of more than two years, the US Federal Reserve’s (Fed’s) tightening phase is now well progressed. But will the Fed over tighten in this cycle?

20 Apr 2018

As the economic cycle in the US matures, investors’ focus is sharpening on when and at what level official US interest rates will peak. A key part of the debate centers on equilibrium real interest rates, the theoretical rate at which capital supply and demand in the economy are in perfect balance and which effectively determines whether monetary policy is restrictive or loose.

We assess current estimates of the real equilibrium rate in the US relative to the Fed’s own long term estimates and consider the likelihood that the Fed may over tighten in this cycle.

More insights