Fed’s George puts neutral rate of around 2.5% “as a starting point”

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FILE PHOTO: Kansas City Federal Reserve Bank President Esther George addresses the National Association for Business Economics in Denver

WASHINGTON (Reuters) – Kansas City Fed president Esther George said she estimates a neutral rate of interest for the U.S. at about 2.5% “as a starting point” of what the Fed should aim for in upcoming rate increases as it assesses what impact it is having on the economy.

“We will have to be watching how the economy unfolds to get a sense of where rate policy is getting traction” and how high rates ultimately need to go, George said, arguing that if consumers as anticipated shift spending back towards services they may be less influenced by Fed rate increases.

(Reporting by Howard Schneider)