FEDERAL Reserve interest rate policy has moved beyond the level called for by commonly followed monetary policy rules, according to a report released on Thursday by the Cleveland Fed, pointing to how hawkish the central bank has become in its inflation battle.
The Fed’s short-term rate target should be at 3.52% in the final quarter of the year, according to the bank’s latest quarterly estimate of where the key central bank rate should be based on seven different rules. This estimate is under the current 3.75% to 4% federal funds rate setting.
The Fed is almost certain to raise its target rate range at the Dec. 13-14 Federal Open Market Committee meeting, and then again in 2023. Some Fed officials have said the target should rise to around 5% by next year.
The rules used in the Cleveland Fed report offer a suggested setting for monetary policy based on different factors, such as inflation and economic activity. These rules draw on the work of Stanford University professor John Taylor and have been tweaked by academics over the years.
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