Publications

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  Assessing a Medium-Run Natural Rate of Interest

  August 17, 2026

  The natural rate of interest is the inflation-adjusted interest rate consistent with the economy operating at full capacity. Although this rate helps gauge the economy’s health, empirical estimates of it are imprecise and volatile. A medium-run measure that focuses on responsiveness to persistent economic factors while removing short-term volatility may provide more reliable guidance. Analysis suggests that monetary policy using this measure could stabilize inflation and achieve maximum employment more effectively than standard benchmarks. Current medium-run estimates suggest that monetary policy is accommodative, although uncertainty around this estimate remains high.

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  SF FedViews: Labor Market in Balance but Inflation Elevated and Uncertain

  July 16, 2026

  Thomas M. Mertens, senior vice president and associate director of research at the Federal Reserve Bank of San Francisco, shared views on the current economy and the outlook from the Economic Research Department as of July 16, 2026.

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  Reaching for Duration

  August 10, 2026

  Using historical data on U.S. commercial bank balance sheets, we show that banks’ maturity mismatch has more than tripled since the mid-1980s, moving in close lockstep with declining interest rates and term premia. We rationalize these trends in a model of bank portfolio choice in which banks must cover operating costs out of current earnings. When term premia or short-term rates decline, banks extend the duration of their assets to remain profitable. This “reaching for duration” effect is convex in the degree of term premium compression. The resulting maturity mismatch renders banks increasingly vulnerable to self-fulfilling runs by uninsured depositors. Consistent […]

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