Though Stifel expects a steeper near-term curve, they doubt Fed will push fed funds much above 2% this cycle. Successively smaller premiums for real fed funds above r* neutral rates have preceded crises and they believe only 50bps above r* (the real rate that neither stimulates nor slows output relative to potential, from Holston and Laubach of the Fed, white paper available), or a2% funds rate vs. an expected 1.5% Core PCE may be “too much” for the markets and economy to bear.

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