Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
How Central Banks Determine the Neutral Rate of Interest
In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna dive into the concept of the neutral rate of interest—often called R-star. They explore why central banks are currently scrutinizing the neutral rate more than ever in July 2026, as the post-pandemic economy reshapes estimates. The hosts break down how the neutral rate is estimated using models from Laubach and Williams, and the Holston-Laubach-Williams approach, referencing specific data from the New York Fed and the San Francisco Fed. They discuss why the neutral rate has been declining since the 1980s, factors like…
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