In his remarks, prepared for the ECB Forum on Central Banking, the president of the Federal Reserve Bank of New York John Williams discussed the r-star - the natural rate of interest.
The official stated that the high degree of uncertainty about r-star means that one should not overly rely on estimates of r-star in determining the appropriate monetary policy setting at a given point in time. "Instead, such determinations must be, and are, based on a wide range of information and assessments, including those related to risks," he added.
Williams, however, noted that it is important that the policymakers do their best to understand the factors that affect r-star and the uncertainties related to it so that they have the best understanding possible of the forces affecting the longer-term evolution of the economy.
Also, he admitted that a sizable decline in estimates of r-star in many advanced and emerging economies during the decades prior to the pandemic reflected developments related to the global supply and demand for savings, including falling birth rates and relatively low productivity growth that both reduce demand for savings, as well as increases in longevity and wealth inequality that increase the supply of savings.