Kaplan: Higher Fed Funds Rate in 2017 Is Appropriate

The transcript discusses the current economic situation, focusing on whether the federal funds rate is appropriate. It suggests that a higher rate in 2017 might be more suitable and debates the pace of removing monetary accommodation. The speaker outlines criteria for rate decisions, emphasizing progress towards full employment and price stability. The concept of the neutral rate is explored, indicating a shift towards a neutral economic stance as fiscal policies take effect. The overall goal is to gradually move towards a neutral stance while considering employment and inflation objectives.

What is the speaker's stance on the federal funds rate for 2017?

• It should be abolished.

• It should be increased.

• It should be decreased.

• It should remain the same.

What are the two main criteria the speaker uses to decide on adjusting the federal funds rate?

• Trade balance and currency strength

• Full employment and price stability

• Stock market performance and GDP growth

• Government spending and tax rates

What does the speaker mean by the 'neutral rate'?

• A rate that changes daily

• A rate that is set by the stock market

• A rate that is always zero

• A rate that is neither stimulative nor restrictive

According to the speaker, what is the approximate neutral rate when considering core inflation?

• 5%

• 3%

• 1 3/4%

• 0%

What does the speaker suggest about the future stance on monetary policy?

• Move towards a neutral stance gradually

• Remain accommodative indefinitely

• Ignore the neutral rate

• Adopt a restrictive stance immediately