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Journal Article
Neutral Interest Rates and the Monetary Policy Stance
The neutral interest rate (r-star) is an important input in monetary policy discussions and is commonly used to assess the stance of monetary policy. This Economic Commentary presents estimates of the neutral interest rate from a recently developed model and provides a high-level description of this new model. With data through 2025:Q2, the model estimates the implied (medium-run) nominal neutral interest rate to be 3.7 percent, with a 68 percent coverage band ranging from 2.9 percent to 4.5 percent. Given that the effective nominal federal funds rate is currently in the range of 4.25 percent ...