Assessing a Medium-Run Natural Rate of Interest

Vasco Cúrdia

FRBSF Economic Letter, 2026, vol. 2026, issue 22, 5

Abstract: The natural rate of interest is the inflation-adjusted interest rate consistent with the economy operating at full capacity. Although this rate helps gauge the economy’s health, empirical estimates of it are imprecise and volatile. A medium-run measure that focuses on responsiveness to persistent economic factors while removing short-term volatility may provide more reliable guidance. Analysis suggests that monetary policy using this measure could stabilize inflation and achieve maximum employment more effectively than standard benchmarks. Current medium-run estimates suggest that monetary policy is accommodative, although uncertainty around this estimate remains high.

Keywords: natural rate of interest; interest rates; real interest rates (search for similar items in EconPapers)
Date: 2026
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