BSJT - What Is The Neutral Real Interest Rate? What About Munis?

• We have written previously about how hard it is for the Federal Reserve to determine policymaking interest rates when there is a simultaneous aggregate demand shock and aggregate supply shock.
• Finding a neutral real interest rate in periods of coincident epidemic shock and war shock is nearly impossible. The shocks are large, and aggregates are difficult to estimate.
• We conclude that the market-based pricing mechanism is favoring the lower 3% natural rate as the nominal outcome once these double-whammy shocks run their course and settle down to some meaningful equilibrium.

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