Free Trial

MNI BRIEF: Fed's Williams - Covid Had Modest Effect On R-Star

The coronavirus pandemic had little effect on estimates of the natural rate of interest, or r-star, which is about 0.5% in the first quarter and forecast to fall to slightly below zero going forward, Federal Reserve Bank of New York President John Williams said Friday.

"The main longer-term consequence from the pandemic period is a reduction in potential output, but the imprint on r-star appears to be relatively modest. Importantly, there is no evidence that the era of very low natural rates of interest has ended," Williams told a conference at the Fed Board of Governors in Washington.

R-star estimates for Canada and the euro area are similarly low, within two-tenths of a percentage point of their estimates in 2019, Williams said. The Fed has resumed its quarterly publication of r-star estimates after suspending it during the pandemic, he added. (MNI INSIGHT: R-Star Falls Out Of Favour As BOE Tightens)

MNI Washington Bureau | +1 202-371-2121 | jean.yung@marketnews.com
MNI Washington Bureau | +1 202-371-2121 | jean.yung@marketnews.com

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.