Monetary policy prospects

In this article Evan Koenig looks at measures of the Federal Reserve’s policy stance and discusses why short-term interest rates will almost certainly have to increase at some point. The article also examines the historical relationship between Federal Reserve policy, inflation and resource slack for insights on future rate changes. Koenig concludes that a wide range of policy outcomes are plausible over the next two years, depending on the strength of the recovery, the economy’s growth potential, and the sustainable unemployment rate—variables that economists can’t, unfortunately, estimate with much confidence.>