The Price of Insurance

Deutsche Bank argues the Federal Reserve is 'overinsured' with a policy rate roughly 50-160bps below levels implied by standard rules given current 3.2% inflation.

Key Takeaways

• 1.The Federal Reserve's current policy stance is too accommodative when compared against standard policy rules like the Taylor rule.
• 2.Policy rules suggest the Fed funds rate should be 50 to 160 basis points higher than its current level.
• 3.The gap remains significant even when using 2026 forecasts from the Fed, Bloomberg consensus, and Deutsche Bank.

Table of Contents

• DB CoTD: The price of insurance
• Appendix 1
• Important Disclosures
• Analyst Certification
• Additional Information
• International Production Locations

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