Investors, economists, and policymakers continue to grapple with the question of whether interest rates will be higher for longer or return to pre-pandemic trend rates over the coming few years. The debate is focused around what economists view as the real neutral short-term interest rate—more colloquially referred to as r-star.
In this Economics Weekly, we discuss current views around r-star, where it might be, and how it might or might not have changed since the pandemic and the war in Ukraine.
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Richard de Chazal, CFA, is a London-based macroeconomist covering the U.S. economy and financial markets.