With More Cuts Coming, It's Time to Get R*
The neutral real rate of interest is back in focus as the shocks from the pandemic and 2008 are finally being worked out of the financial system.
Which one is the R-star? (Vincent Van Gogh, ‘The Starry Night’)
Source: Fine Art/Corbis Historical/Getty
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The last few days have been an exercise in game theory. What were the main motivations for the Federal Reserve, and would that prompt them toward a cut of 0.25% or 0.5% in the fed funds rate? We have our answer, and after a brief pause for contemplation, investors have taken stock markets to fresh records. The S&P 500 closed Thursday at its first all-time high in two months; the summer swoon is firmly in the past.