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Primer

The Neutral Fed Funds Rate

Sunday, September 26, 2004; Page F03

• The level at which the Federal Reserve's federal funds rate, the overnight rate charged between banks, neither stimulates nor slows economic growth.

• A rate that varies depending on economic conditions.

• A number that several Fed officials have recently pegged at between 3 percent and 5 percent.

• The subject of intense speculation as traders, investors and analysts guess how far the Fed will go in raising the rate over the next year or so.

• "A moving target," according to Fed Bank of Cleveland President Sandra Pianalto.

• A number that Fed Chairman Alan Greenspan has declined to specify, saying, "When we arrive at neutral, we will know it."

-- N.H.


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