Sweet Spot

AAA

DEFINITION of 'Sweet Spot'

The point at which an indicator or policy provides the optimal balance of costs and benefits. This term is often used to refer to situations where economic data, such as interest rates or employment numbers, are currently or expected to lead to the best overall economic situation.

INVESTOPEDIA EXPLAINS 'Sweet Spot'

For example, the current level of interest rates can be considered to be in a sweet spot if they keep inflationary pressures in check, but don't do so at the cost of the overall market. Similarly, when the current level of employment in an economy is enough to stimulate economic growth without leading to higher levels of inflation through wage pressures, this could also be referred to as a sweet spot.

RELATED TERMS
  1. Federal Funds Rate

    The interest rate at which a depository institution lends funds ...
  2. Fed Model

    A model thought to be used by the Federal Reserve that hypothesizes ...
  3. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  4. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
  5. Prime Rate

    The interest rate that commercial banks charge their most credit-worthy ...
  6. Ben Bernanke

    The chairman of the board of governors of the U.S. Federal Reserve. ...
Related Articles
  1. The Federal Reserve
    Economics

    The Federal Reserve

  2. Get To Know The Major Central Banks
    Forex Education

    Get To Know The Major Central Banks

  3. Interest Rates And Your Bond Investments
    Investing Basics

    Interest Rates And Your Bond Investments

  4. How Is Europe Affecting The Martkets?
    Economics

    How Is Europe Affecting The Martkets?

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center