Underlying Trends in the U.S. Neutral Interest Rate

Carlos Carvalho, Andrea Ferrero, Felipe Mazin () and Fernanda Nechio
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Felipe Mazin: https://economics.sas.upenn.edu/people/felipe-mazin

FRBSF Economic Letter, 2025, vol. 2025, issue 10, 6

Abstract: After a prolonged decline, U.S. inflation-adjusted interest rates have increased somewhat since the pandemic—possibly implying a higher new normal. As central banks attempt to tame the post-pandemic inflationary bout, whether real rates will fall back closer to pre-pandemic levels will ultimately depend on the trends in their long-term underlying determinants. Estimates suggest that the pre-pandemic downward pressures from global factors and from U.S. population aging have faded, while fiscal conditions continue to put upward pressure on U.S. real rates.

Keywords: inflation; interest rates; pandemic; covid19; population aging; Global factors; real rates (search for similar items in EconPapers)
Date: 2025
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