In terms of neutrality or equilibrium or whatever...[p]resumably there is a range, and we're close to and likely within the range of where it should be in my opinion.

Stern...told Reuters in an interview that since official interest rates now are at or near neutral, policy decisions have become more complex than earlier in the tightening cycle.  "I'm comfortable with it as of March 3," said Stern when asked about the view the Fed did not need to go beyond neutral to a contractionary stance, which would slow economic growth.   "This is going to be data-driven and I try to be receptive to incoming information. If the incoming data turned out to provide some surprises, or caused me to become more concerned about price stability than I am right now, that could change," Stern said.  "We are now in a place where decisions are somewhat more complex because we have covered a lot of ground and we are closer to, if not at, neutral," said Stern.

I think we've been carefully to reduce enthusiasm for the proposition that we can look at the world today and make tightly calibrated judgments with confidence about where equilibrium is, and therefore where we are against it. You know, as you know, you must know that those estimates, a lot of candle power is thrown at those estimates. And I think the state of the art shows wide bands of uncertainty around that measure. And that the center of the range moves around a lot over time, quite a lot over time.

From the audience Q&A session

Conceptually, it's easiest to think about the neutral—or equilibrium—rate as being the rate consistent with an economy growing steadily along its potential growth path over a long period of time. One can make rough estimates of the neutral real rate by using historical averages of the real federal funds rates from comparable periods. ... Of course, this is a crude estimation. ... For example, all else equal, stronger trends in productivity would raise the equilibrium real rate; in contrast, increased willingness of foreigners to invest their savings in the U.S. would lower the rate.

Although the concept of a "neutral interest rate" is a useful theoretical construct, difficulties in implementing it in practice limit its usefulness as a framework for monetary policymaking.  For one thing, a variety of definitions of a neutral real interest rate are possible.  For another, quantitative estimates of the level of such a rate are subject to considerable uncertainty.  Also, such estimates can vary widely depending on the type of measure and the prevailing and projected economic conditions.  In particular, all variables that contribute to making a macroeconomic forecast are relevant for estimates of neutral interest rates, greatly complicating such assessments.  Thus, it is impossible to know with any certainty when the neutral rate has been reached.

The use of neutral real rates in the formulation of monetary policy is not necessarily straightforward.  For instance, in some circumstances, attaining a "neutral" federal funds rate would in principle be an appropriate objective for monetary policy, but in others -- particularly when inflation is too high or too low -- aiming for a neutral funds rate in the near term would not be appropriate.  These uncertainties and complications suggest that reliance on a single summary measure such as a neutral real interest rate would be unwise as a strategy for formulating monetary policy.  Rather, a full consideration of current and prospective economic developments, and of the risks to the outlook, is essential for the conduct of monetary policy.

Looking ahead, it’s my belief that—despite the effects of the hurricanes—the most likely path of the economy for the next several quarters is ongoing respectable growth of GDP, employment, and income. That pattern suggests to me that we should continue to move toward a neutral setting for monetary policy. The Fed already has moved interest rates a long way toward a more normal level consistent with sustainable growth. By most conventional measures, however, policy is still accommodative.

As the federal funds rate target nears a reasonable estimate of the neutral rate, monetary policy must become more and more dependent on incoming data relating to the strength of aggregate spending.

To keep these incipient price pressures well-contained, the Fed will have to continue shifting monetary policy from its current somewhat accommodative stance to a more neutral one.

I think we're fairly accommodative at these rates. I agree the outlook ... as the FOMC (Federal Open Market Committee) statement reads, is for continued measured increases. I think that it is too early to say when we're going to stop. It's obviously going to be data-dependent.

If the economy evolves as I anticipate over the next year or so, I expect we will continue to move the federal funds rate toward neutrality at a measured pace. But the precise course the Fed takes very much depends on the precise course the economy takes...If signs emanating from the economy suggest that the economy is veering off its most likely course, we will need to consider altering the pace at which we move toward policy neutrality. At the moment, however, this does not seem to be the case.

The Federal Reserve has been committed to making the transition from an accommodative policy stance to a neutral one, more conducive to sustained noninflationary economic growth. This process began about a year ago and is ongoing. The challenge here is to move the interest rate back to a more neutral level without dampening growth in real output or generating undue negative sentiment.

But the precise course the Fed takes very much depends on the precise course the economy takes. If signs emanating from the economy suggest that the economy is veering off its most likely course, we will need to consider altering the pace at which we move toward policy neutrality. At the moment, however, this does not seem to be the case.

Given my current outlook for the economy, my personal view is that we’ve not yet reached a neutral policy stance.

Monetary policy is still accommodative...But, over time, this policy stance will not be consistent with keeping inflation down. Interest rates need to rise to forestall a buildup of imbalances between aggregate demand and potential supply that would threaten to raise inflation and undermine stability.