In today's circumstances, the fact that the U.S. economy is growing at a pace only modestly above potential while core inflation remains restrained suggests that the nominal neutral rate may not be far above the nominal federal funds rate, even now.
In fact, various econometric estimates of the level of the neutral rate, or similar concepts, are consistent with the low levels suggested by this simple heuristic approach.5 The Past and Future Neutral Rate In assessing the policy path ahead, the critical question is whether a low neutral rate is likely to be a "new normal" in the longer run or whether the neutral rate is soon likely to increase back to levels considered normal in the decades before the crisis.