Why the Fed Is Obsessed With the Real Rate

Lucas and Luna unpack the Federal Reserve's subtle pivot toward the real interest rate — the nominal rate minus inflation expectations — and why it matters right now. With the effective fed funds rate at 3.63 percent and ten-year breakevens sliding to 2.27 percent, the real rate has quietly climbed to levels not seen since before the 2008 crisis. The hosts explain how this shift is shaping the Fed's reaction function under Chair Kevin Warsh, why a divided FOMC is reading the same data differently, and what a rising real rate means for equities, housing, and the labor market. They also revisit the Fed's own estimates of the neutral rate, which the Fed now pegs around 0.5 to 0.7 percent real — a number that suddenly looks restrictive against the current 1.36 percent real rate. With fresh data showing core PCE still sticky at 3.3 percent, Lucas and Luna debate whether the Fed can afford to let the real rate do the tightening for them. A must-listen for anyone trying to decode the next FOMC move. #FederalReserve #InterestRates #MonetaryPolicy #RealRate #Inflation #FOMC #KevinWarsh #FedPivot #CorePCE #Breakeven #NeutralRate #Economics #Economy #BusinessPodcast #FexingoBusiness #Macro #Investing #FedWatch Keep every episode free: buymeacoffee.com/fexingo