San Francisco Fed paper suggests current policy may be accommodative

New research from the Federal Reserve Bank of San Francisco suggests that the central bank's current policy stance may be accommodative, a view that contrasts with the prevailing assessment among most U.S. policymakers.

The analysis, published in the bank's latest Economic Letter, uses a medium-run estimate of the neutral rate of interest — the level at which borrowing costs neither stimulate nor restrain economic growth. Under this measure, the current target range of 3.50% to 3.75% sits roughly half to three-quarters of a percentage point below a neutral setting.

Most Fed officials currently view policy as restrictive or possibly neutral. Estimates based on the long-run neutral rate, which policymakers often reference, suggest the benchmark rate is about half a percentage point above a neutral level.

Vasco Curdia, a research advisor at the San Francisco Fed, wrote that monetary policy guided by a medium-term neutral-rate measure could stabilize inflation and support maximum employment more effectively than standard benchmarks. As of August 2026, he noted, such estimates indicate policy is accommodative, though uncertainty around the figure remains high.

The paper argues that relying on a longer-run neutral-rate estimate may produce less optimal economic outcomes than rules based on a medium-term measure. Fed policymakers frequently use neutral rate estimates to judge whether policy is tight or loose and to inform decisions on raising or lowering interest rates.

Widely used policy rules typically incorporate a longer-run neutral rate estimate, which tends to be relatively stable. Short-run estimates are sometimes discussed but are highly volatile, limiting their practical use.