Fabian Winkler (Federal Reserve Board) - The Natural Rate of Interest Through a Hall of Mirrors

Research seminars

Fabian Winkler (Federal Reserve Board) - The Natural Rate of Interest Through a Hall of Mirrors

Co-author: Phurichai Rungcharoenkitkul (BIS)

Abstract:
Why have global real interest rates fallen so much? A common explanation is that factors such as shifting demographics and falling potential growth depress the natural interest rate, or r-star. This view has striking policy implications: central banks have no choice but to lower interest rates to keep their economies in balance. After all, they cannot control the natural interest rate. Extraordinary monetary policy and recent policy framework reviews can be seen as part of the strategy to combat the decline in r-star.

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