And yes, actually the market reaction has really being quite muted and I don't know whether this partly reflects the new economic norm, you know the flattening of the Phillips Curve, disruptive change, lower inflation the Fed talked about at the Jackson Hole Summit last year, something called Our Star which is going to lower long - term rate of
equilibrium interest rates.
In an environment of persistently low inflation and
real equilibrium interest rates, the Fed will not be able to raise rates much further.
Now, we're sympathetic to the idea that prospective real growth and inflation may be sufficiently lower in the future to place us into a low nominal growth world, which would also justify
lower equilibrium interest rate levels.
In an environment of persistently low inflation and real
equilibrium interest rates, the Fed will not be able to raise rates much further, limiting the space to cut interest rates during the next downturn.
STANLEY FISCHER: You know, it was — the real interest rates that people are estimating as being
the equilibrium interest rate for the long term, short — sorry, the short - term interest rate that people are estimating as equilibrium is very close to zero.
Namely, an expansionary fiscal policy would raise
the equilibrium interest rate.
For instance, for Canada and the U.S., we believe that
the equilibrium interest rate in these conditions is on the order of 3 per cent, like a range of 2.5 per cent to 3.5 per cent, so much lower than what we used to think of as a normal, steady, straight interest rate.
Jury is still out on secular stagnation — «At present, it looks likely that
the equilibrium interest rate will remain low for the policy - relevant future, but there have in the past been both long swings and short - term changes in what can be thought of as equilibrium real rates»
He has no conception of
an equilibrium interest rate determined by society's average time preference, so bubbles will always surprise him.
Phrases with «equilibrium interest»