Despite stronger growth in 2017 and the Fed’s tighter policy stance, the natural rate of interest in the US will be much lower than in the past, John Williams said on May 15.
The San Francisco Fed president spoke at the Economic Club of Minnesota about his outlook on the natural rate of interest or “r-star”. He defined this as “the real interest rate expected to prevail when the economy is at full strength”. Williams considers it is around 0.5%.
“Assuming inflation is running at our goal of 2