What’s the Future of Interest Rates? The Answer’s in the Stars
John C. Williams
October 11, 2017
Mr
Williams is very talkative and funny FED CEO. He keens to talk about R star (Natural
rate of interest). Firstly, you can download his speech from this link.
What is the value of R star ?
My
own view is that r-star today is around 0.5 percent. Assuming inflation is
running at our goal of 2 percent in the future, the typical, or normal
short-term interest rate would be 2.5 percent.
What
are the factors that have pushed r-star to this low level ?
a-Sustainable
growth rate of the economy has slowed
a.1-
Decline in labor force growth
a.1.1- Baby boomers are retiring
a.1.2- Fertility rate has been declining
a.2-Slower
productivity growth
Dr. Engin YILMAZ
Ankara
03.11.2017
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