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Bullard on R-Star: The Natural Real Rate of Interest: a presentation at the 34th Annual National Association for Business Economics (NABE) Economic Policy Conference, Washington, D.C

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Abstract

St. Louis Fed President James Bullard discussed the natural real rate of interest (commonly called r*) and its implications for the Fed?s policy rate at the NABE Economic Policy Conference in Washington, D.C. He presented a regime-switching view of the issues around the natural real rate of interest, which he called r-dagger (r?) to emphasize that these estimates use an alternative methodology. Bullard considered three factors that can influence the natural rate and noted that the U.S. is currently in a regime (or state) of low productivity growth, appears to be in a low-growth state for the U.S. labor force, and is in a regime of a high desire for safe assets (the most important of the three factors). He concluded that the natural safe real rate of interest, and hence the appropriate policy rate, is relatively low and unlikely to change very much over the forecast horizon of two years.

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  • James B. Bullard, 2018. "Bullard on R-Star: The Natural Real Rate of Interest: a presentation at the 34th Annual National Association for Business Economics (NABE) Economic Policy Conference, Washington, D.C," Speech 302, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlps:302
    Note: Related article in Business Economics, Vol. 53, No. 2, pp. 60-65, R-star wars: the phantom menace.
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    References listed on IDEAS

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    1. Lukasz Rachel & Thomas Smith, 2015. "Secular Drivers of the Global Real Interest Rate," Discussion Papers 1605, Centre for Macroeconomics (CFM).
    2. Thomas Laubach & John C. Williams, 2003. "Measuring the Natural Rate of Interest," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1063-1070, November.
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