Shifting To Neutral.(ISSUES & INSIGHTS)(EDITORIALS)(Editorial)

Monetary Policy: Another Fed meeting, another rate hike. At some point, the Fed will get rates to the magic "neutral" level it says it wants. But how will we know?

This is more than an idle question. Policy-makers have lifted interest rates a quarter-point in nine straight meetings going back a year, and it's an open question as to when they will stop.

For its part, the Federal Open Market Committee said Thursday that its policy remains "accommodative" -- an adjective that's appeared in every official Fed statement the past two years, according to TrendMacrolytics economist David Gitlitz.

So expect more increases.

Indeed, the futures market already has placed a 90% likelihood on another quarter-point hike when the FOMC next meets Aug. 9. The probability of at least another quarter-point after that is 80%.

Most analysts think the Fed wants to push rates to a "neutral" level that neither stimulates nor slows economic growth. But depending on the analyst, "neutral" is defined as anywhere from 3% to 5 1/2%.

Debating "neutrality" in this case is something like debating how many angels can dance on the head of a pin.