In 2015, as it started its rate hiking cycle, we observed the US Federal Reserve (the Fed) was embarking on a ‘voyage of discovery’. Many of the questions we previously thought we knew the answer to were suddenly a lot more uncertain in the post-Global Financial Crisis world.
As we started to think about the outlook for interest rates, we were pondering questions such as: Where is the new non-inflationary potential rate of GDP growth? What level of the unemployment rate represents the new non-accelerating inflation rate of unemployment or NAIRU? Where is the new neutral Fed funds rate?
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