Real interest rates are now at extremely high levels, after rising 5.6 percentage points since April 2022.
Why it matters: So long as inflation expectations continue to decline, real rates will continue to rise — a stealth tightening that could help preclude further actual Fed hikes.
How it works: The Fed funds rate is now 2.7 percentage points higher than expected inflation over the coming year.
What they're saying: "Look at the nominal rate and then subtract a reasonable estimate of, let's say, one-year inflation," said Fed chair Jerome Powell at a news conference earlier this month. "Policy is tight."