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Analyzing the Fed's Interest Rate and Inflation Targets
The Federal Reserve aims for a two percent inflation rate and anticipates achieving it over time. To achieve a 50 basis point real return, the Fed plans to set the funds rate at two and a half percent. From a historical perspective, the funds rate has typically been 50 basis points lower than the two-year rate, leading to an estimated four percent funds rate currently. It is predicted that the 10-year rate will remain stable, while the 30-year rate is expected to increase as the yield curve re-steepens.