“There is no evidence that the era of ultra-low natural interest rates is over,” Williams told a U.S. Central Bank conference in Washington. seems to be “relatively modest”.
The term “R-Star,” the interest rate that neither stimulates nor discourages economic activity, is a benchmark for measuring monetary policy stance, and before the outbreak spread, that rate was historically low, which allowed the Fed to maintain the interest rate target at fairly low levels.
And compared to pre-pandemic ‘R-Star’ estimates, which often hovered around the 0.5% range, Williams said, ‘The ‘R-Star’ rate estimates point to about half a percent at first quarter of 2023, then this rate will then fall to just below zero. “.
But the pandemic and its shocks to the global economy, including high levels of inflation, clouded efforts to estimate “R-Star” rates, and the New York Fed stopped releasing its closely watched estimate late. 2020.
John Williams said that given efforts to understand how the pandemic affects “R-Star” rates, the regional Fed will again provide an estimate on a quarterly basis.
According to new estimates from the Federal Reserve Bank of New York on Friday, “R-Star” rates stood at 1.16% in the last three months of last year, compared to 1.81% in the fourth quarter of 2021 .
According to data dating back to 1961, the highest level of “R-Star” rates was 5.26%.
Williams, who is also vice chairman of the central bank’s Federal Open Market Committee, did not comment on the outlook for economic or monetary policy in his remarks, but his comments suggest that once the Fed’s struggle to contain a high inflation ended, it might again later be able to bring it back to normal Short-term interest rates at low levels.
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