So, what does the neutral rate mean? Intuitively, I think of the nominal neutral interest rate as the level of the federal funds rate that keeps output growing around its potential rate in an environment of full employment and stable inflation. 3  1 I am grateful to John Roberts of the Federal Reserve Board for his assistance in preparing this text.
These remarks represent my own views, which do not necessarily represent those of the Federal Reserve Board or the Federal Open Market Committee. 2 See Board of Governors (2018a). 3 The closely related concept of the natural rate of interest--the rate of interest at which investment and savings are equilibrated at full employment--is originally attributed to Swedish economist Knut Wicksell.