Why Central Banks Are Watching the Neutral Rate Again

In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna dig into R-star — the neutral rate of interest — and why it matters more than ever in mid-2026. They use the recent Federal Reserve Summary of Economic Projections as a case study, showing how the median longer-run fed funds rate estimate has drifted upward since pre-pandemic levels. Lucas explains how neutral rate estimates inform rate decisions, why they are unobservable and model-dependent, and what a higher R-star implies for the economy. Luna pushes back on the reliability of these estimates, noting the wide confidence intervals. The conversation also touches on the debate between secular stagnation and persistent fiscal stimulus as drivers of R-star. A focused, accessible look at one of central banking's most important — and most elusive — concepts. #RStar #NeutralRate #FederalReserve #MonetaryPolicy #CentralBanking #InterestRates #EconomicForecasting #FedSEP #LucasAndLuna #FexingoBusiness #BusinessPodcast #Economics #Macroeconomics #SecularStagnation #FiscalStimulus #LongRunRate #RateDecisions #Investing Keep every episode free: buymeacoffee.com/fexingo