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Discussion Paper
Comparing Apples to Apples: “Synthetic Real‑Time” Estimates of R‑Star
Estimates of the natural rate of interest, commonly called “r-star,” garner a great deal of attention among economists, central bankers, and financial market participants. The natural interest rate is the real (inflation-adjusted) interest rate expected to prevail when supply and demand in the economy are in balance and inflation is stable. The natural rate cannot be measured directly but must be inferred from other data. When assessing estimates of r-star, it is important to distinguish between real-time estimates and retrospective estimates. Real-time estimates answer the question: ...
Journal Article
The Fault in R-Star
Has the natural rate of interest lost its luster as a navigation aid for monetary policy?
Speech
Why Were Forecasts Off?
It is notoriously difficult to predict where the economy is headed. Even in that context, I don’t think it is controversial to say that the last few years have proven particularly challenging for forecasts.The U.S. economy, particularly its consumer, has been much more resilient to rate increases than most expected. Most anticipated we would be cutting rates by now, but that has not yet been the case.I do believe there are still lags playing out — and that all this tightening will eventually slow the economy further.I’m open to the idea that r-star has shifted up somewhat. It is too ...