Federal Reserve System question??

In September of 2004, Janet Yellen, the President of the Federal Reserve Bank of San Francisco (one of 12 regional banks that make up the Federal Reserve System), was quoted in the Wall Street Journal as saying that a neutral federal funds rate would probably be between 3.5% and 4.5%. She went on to say that %26quot;with the actual funds rate currently as low as it is, there is thus reason for a strong presumption that rates will need to keep going up as we move forward.%26quot;

Take 4%, the midpoint of Dr. Yellen%26#039;s estimate, as a neutral interest rate. The FOMC meets eight times per year. If the FOMC continues to raise the target federal funds rate by the same amount in each subsequent meeting, when will monetary policy reach neutral?

A. After four meetings (this summer)

B. After two meetings (this spring)

C. After 6 meetings (the last quarter of this year)

D. In about two years

I dont understand this question. Help!

Federal Reserve System question??school loans

Your best bet would be to look up the Sept %26#039;04 rate and then just do the math from there. Since your answers are so defined I would guess that you do need some starting figure.

On a side note, there isn%26#039;t really a %26quot;neutral%26quot; rate, or at least, it changes with the fluctuations in the economy. When Dr. Yellen said this it was talking about a specific time and place. The neutral rate is different now, as the economy is different. But that has nothing to do with your question, just a little background. For something as seemingly straightforward as this, yes, you do need a start rate.

P.S. This is a horrible question to teach you anything about monetary policy!

Federal Reserve System question??

loan

If this is a current question on some type of test, the test is out dated because the rate she is talking about is already 5.5%.

My answer would be none of the above!

However your teacher may have a different answer,,,,,sorry.

**************************************...|||Yu lost me in the second sentence but isn%26#039;t that supposed to be mutual and not neutral?