A Window into Bond Investors’ Uncertainty About R‑Star

Guillaume Roussellet

No 2026804, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Monetary policymakers closely monitor the term structure of sovereign bond yields to uncover market participants’ beliefs about the future monetary policy stance, inflation, and activity. A particular object of interest is the natural real rate of return, or “r-star,” which acts as a guide for monetary policy decisions. Numerous papers have questioned how much information investors possess, and how precisely they know r-star. In this post based on a recent Staff Report, we explore what the term structure of interest rates can teach us about r-star and its perception by investors.

Keywords: r-star; Subjective beliefs; Incomplete information; term structure of interest rates (search for similar items in EconPapers)
JEL-codes: E43 E58 (search for similar items in EconPapers)
Date: 2026-08-04
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:103600

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DOI: 10.59576/lse.20260804

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