Capital Markets: Observations & Insights
Monetary Policy Is Not Restrictive Fundamentals
• Over the past half century, every U.S. recession has been preceded by a significantly positive real Federal Funds rate of 2% or higher
• In contrast, today we have a real Fed Funds rate of about 0%
Real Federal Funds Rate Prior to U.S. Recessions
10%
5%
Today real short-term interest rates are far
4%
4%
4%
3%
3%
2%
lower than what induced previous recessions
2%
0%
Source: FactSet as of March 2018. Inflation represented by PCE Price Index ex-food and energy (year over year). Nominal Federal Funds rate is average of 3 months prior to recession. Horizontal axis labels denote recession periods.
Page 20
Made with FlippingBook - professional solution for displaying marketing and sales documents online