Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
Why Central Banks Are Watching the Neutral Rate Again
In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna dig into R-star — the neutral rate of interest — and why it matters more than ever in mid-2026. They use the recent Federal Reserve Summary of Economic Projections as a case study, showing how the median longer-run fed funds rate estimate has drifted upward since pre-pandemic levels. Lucas explains how neutral rate estimates inform rate decisions, why they are unobservable and model-dependent, and what a higher R-star implies for the economy. Luna pushes back on the reliability of these estimates, noting the wide…
The skinny
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