Can Fiscal, AI, or Monetary News Explain the Rise in r∗

Following decades of secular decline, many estimates of r∗-the natural or steady-state short-term real interest rate-have risen roughly 1 percentage point since 2020 in the United States. The most prominent explanations attribute this reversal to heightened expectations of rising government debt and faster productivity growth from artificial intelligence (AI). However, a high-frequency event study finds that news about fiscal and AI developments does not explain this increase. Furthermore, contrary to earlier evidence that persistent shifts in longer-term yields occurred around monetary policy meetings, we find that monetary policy news does not account for the recent rise in r∗.

Suggested citation:

Christensen, Jens H. E. and Glenn D. Rudebusch. 2026. "Can Fiscal, AI, or Monetary News Explain the Rise in r∗?" Federal Reserve Bank of San Francisco Working Paper 2026-19. https://doi.org/10.24148/wp2026-19