Central banks have come under heavy criticism in recent months as they let inflation rise dramatically and now try to rein it in with rapid interest rate hikes.
"The estimates of economists for the real rate of interest range from -3% to +5% with one in three economists estimating that the natural real rate of interest is 0% or negative."
The estimates of weather forecasters for tomorrow's weather ranges from severe hurricanes to slightly clouded with one in three forecasters estimating that temperatures could go as low as -15 degrees or as high as +45.
Is the implication of central banks underestimating the natural real rate of interest that central banks are overcooking their policy response? In other words, is the policy rate higher than it should be and therefore monetary policy is likely to cause economic headwinds?
"The estimates of economists for the real rate of interest range from -3% to +5% with one in three economists estimating that the natural real rate of interest is 0% or negative."
The estimates of weather forecasters for tomorrow's weather ranges from severe hurricanes to slightly clouded with one in three forecasters estimating that temperatures could go as low as -15 degrees or as high as +45.
Is the implication of central banks underestimating the natural real rate of interest that central banks are overcooking their policy response? In other words, is the policy rate higher than it should be and therefore monetary policy is likely to cause economic headwinds?