Anna Paulson, president of the Federal Reserve Bank of Philadelphia, told attendees at the Atlanta Fed’s Financial Markets Conference on May 19 that the current federal funds rate of 3.5% to 3.75% is « in a good place ». She maintains a data-dependent approach and will not commit to any particular direction on rates before seeing clear trends in underlying inflation and labor market dynamics. Her longer-run estimate for the neutral rate, sometimes called R-star, sits at approximately 3.1%. Higher interest rates reduce overall market liquidity and increase the opportunity cost of holding non-yielding assets like Bitcoin, which applies consistent downward pressure on the broader crypto market.
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