Capital Markets: Winter 2019

Monetary Policy Is Not Restrictive ​ Fundamentals

• Over the past half century, every U.S. recession has been preceded by a significantly positive real Fed Funds rate of 2% or higher

• In contrast, today we have a real Fed Funds rate of close to 0%

Real Federal Funds Rate

15%

10%

Today real short-term interest rates are far

5%

lower than what induced previous recessions

0%

-5%

-10%

1960

1962

1965

1967

1970

1972

1975

1977

1980

1982

1985

1987

1990

1992

1995

1997

2000

2002

2005

2007

2010

2012

2015

2017

Source: FactSet, through December 2018. Real Federal Funds rate is equal to the Federal Funds rate less the year-over-year change in the PCE Price Index ex-food and energy. Shaded regions denote U.S. recessions.

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