Neutral rate

A Federal Funds rate of  3-4% is neutral, and when rates were at 1-2% they were stomping on the gas trying to get the economy going. It wasn’t that long ago they went to 6% to slow the economy. So until they get past 4% we need to consider this a move back to neutral.

The Fed is concerned, for good reason, about the housing sector. But that doesn’t mean they will move because of it. That would be too harmful as it would affect everyone, not just the speculators. If they really want to pop housing, I would think you would hear more about tightening credit controls on second and third homes. That would send the message that it can’t continue and hopefully allow the market to unwind slowly avoiding the precipice that’s approaching.

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