The Federal Reserve's Distance From a Neutral Rate

The video discusses the Fed funds rate adjusted for inflation, highlighting the challenges of increasing real rates after a period of monetary easing. It explores the market's reaction to potential rate hikes and the Fed's dilemma in balancing economic stability with inflation control. The discussion includes the concept of a neutral rate and the risks of recession due to contradictory messages from the Fed.

Discuss the relationship between inflation and the Fed's balance sheet.

What are the potential consequences of increasing rates substantially?