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Fed’s Williams casts doubt over rise in neutral rate

The value of R-Star is always highly uncertainBut the case for a sizable increase has yet to meet two important testsRecent data reinforce the continuation of pre-pandemic trends in global demographics and productivity growthOne should not overly rely on estimates of R-Star in determining appropriate monetary policy setting at a given point in time

This is a debate for economists and not really one for traders. There is a camp in the former that argues that the real neutral rate of interest has risen but Williams is downplaying that as you would expect, given that the Fed is looking to cut rates with no actual target floor just yet.

This article was written by Justin Low at www.forexlive.com.

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