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Why Central Banks Are Watching the Neutral Rate
Season 2
Episode 71
Published 2 days, 1 hour ago
Description
Episode 71 dives into R-star — the neutral rate of interest that central banks can't see but constantly chase. Lucas and Luna unpack why the Federal Reserve, ECB, and Bank of Japan are obsessing over this unobservable number in mid-2026, how it shapes rate decisions without ever being announced, and why recent estimates have drifted higher. They walk through the Laubach-Williams model, John Williams' role, and the practical problem: if you don't know where neutral is, every rate decision is a guess. Specific, grounded, no fluff.