Real Fed Funds Rates Since 1971

As Federal Reserve officials (i.e., the most powerful group of unelected policy makers in the world) gather to discuss if and when they should raise short-term interest rates, it’s worth reviewing how we got here from the perspective of real interest rates.

Since this chart hadn’t been updated since Ms. Yellen took over at the Fed and the official measure of inflation reached its lowest level since the 1950s (save for a few months in 2009 during the financal crisis),  a slight uptick in real rates was expected.

The 0.11 percent Fed funds rate and current annual inflation of -0.1 percent have combined to push real interest rates back into positive territory for the first time in five years.

Paraphrasing Bill Murray in Caddyshack, “So, we got that going for us, which is nice”.