U.S. Neutral Rate Projected to Hit 4.09% in Q4 2026, Exceeding Fed's Target Range

According to Hyundai Economic Research Institute on July 12, the U.S. neutral rate is projected to reach 3.97% in the third quarter and 4.09% in the fourth quarter of 2026, both exceeding the Federal Reserve's current target range of 3.50%-3.75%. The institute forecasts the neutral rate will peak at 4.17% in Q1 2027 before declining to 4.07% in Q4 2027 as inflation stabilizes.

The projections align with the Federal Reserve's recent guidance suggesting potential additional rate hikes. If realized, U.S. rate increases could create downward pressure on global currencies, trigger substantial capital outflows, and amplify exchange rate volatility.