- Amid the debate over whether and when the Federal Reserve cuts interest rates, another important argument is unfolding: where do rates settle in the long run? Modeling the effects of interest rates therefore requires not only an estimate of neutral, but also of how sensitive spending is to rate changes and the lag between spending and prices, The WSJ reports. “That’s a lot to get right, especially when errors in one area can easily be mistaken for mis-estimates elsewhere,” said Jason Thomas, chief economist at private-equity manager Carlyle.