The economy is somewhere in the Federal Reserve’s interest rate hiking saga to tame inflation, but people already want to know where the story ends. That’s what’s getting discussed when economists, policy makers and investors talk about the “terminal rate” — and the focus on the end game is only going to continue as the rate hikes stack up.
On Wednesday, the Fed delivered the fourth straight increase to a key benchmark interest rate, a three-quarter percentage-point increase that mirrors an increase of the same size in June. It’s the quickest pace of tightening since 1981, and the central bank signaled more increases to come. Technically, the terminal rate is defined as the peak spot where the benchmark interest rate — the federal funds rate — will come to rest before the central bank begins trimming it back.
“ The terminal rate is defined as the peak spot where the benchmark interest rate — the federal funds rate — will come to rest before the central bank begins trimming it back.”
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