5 It is worth highlighting that the longer-run federal funds rate is the only neutral interest rate reported in the FOMC projections. But the shorterrun neutral rate, rather than the longer-run federal funds rate, is the relevant benchmark for assessing the near-term path of monetary policy in the presence of headwinds or tailwinds.
The missing ingredient continues to be a lift in non-mining business investment, where we are still waiting for convincing signs of a pick-up. The latest reading from the Australian Bureau of Statistics on firms’ capital spending plans outside the resources sector did show a slight improvement from earlier readings, but a material lift in non-mining business investment still seems to be some way away.