Explicit Neutral Rate (r*) Proxy Signal

Signal Summary:

• Configuration statement: Given a stance_gap of -0.62 and policy_real_proxy of 1.26, this setup aligns with Upward-biased price paths and Normal volatility, where the dominant risk is Regime shift, not Mean reversion (1).
• The signal identifies an Accommodative regime driven by real policy rates remaining below the market-implied neutral rate.
• Conviction Band: Medium; Interpretation Confidence: High Confidence; Internal Conflict Flag: No.
• Signal Stability Assessment: Volatile; Threshold Proximity: Near; Revision Sensitivity: Unknown.

Methodology Applied:

• A stance_gap of -0.50 or lower classifies the policy stance as Accommodative, supporting growth and risk assets (1).
• Negative stance_gap values indicate an expansionary regime bias (1).
• The neutral_drift metric identifies changes in the neutral rate context, where values within +/- 0.10 are considered Stable (1).
• Explicit Neutral Rate (r*) Proxy Signal (latest observation: 2026-03-20).

Key Dynamics:

• The primary driver is the stance_gap (-0.62), which remains below the -0.50 accommodative threshold (1).
• Momentum has shifted back toward accommodation after a brief mid-February period of "Near neutral" alignment.
• Internal stability is supported by a "Stable" neutral_drift following a period of falling neutral rate context.
• Conditional Invalidation: The stance_gap rising above the -0.50 threshold toward a "Near neutral" classification.
• The signal is currently volatile, having transitioned between regimes twice in the last thirty days.

Scenario Balance:

• Base case dominant: Accommodative conditions persist, providing an expansionary impulse to the broader economy.
• Upside risk: Rising neutral rate (r*) drift reduces the effective restrictiveness of any future rate hikes.
• Downside risk: Higher-than-expected inflation persistence forces policy rates higher, closing the stance gap.

Time Horizon & Aggregation:

• Time Horizon: Cyclical (months); the signal maps 10-year market anchors to policy cycles.
• Aggregation Weight Hint: Medium; reflects the moderate confidence level and recent regime volatility.

Macro Relevance:

• Informs the liquidity and growth dimension of the US macro environment.
• Economic mechanism: Lower real policy rates relative to neutral levels reduce borrowing hurdles and stimulate risk-taking.
• Cycle position: Not determined.
• Typically interacts with Federal Reserve Liquidity (2) and US Inflation signals (3).

Regime Context:

• Newly re-entered Accommodative regime as of mid-March.
• Direction of change: Strengthening accommodation as the stance_gap deepens.

Model Limitations:

• Market-implied r* includes liquidity and risk premia which may distort the "true" neutral rate.
• The 10-year estimation horizon may mismatch near-term tactical policy adjustments (1).

Data & References:

• Explicit Neutral Rate (r*) Proxy Signal (2026-03-20) (1).
• Dominant datapoints: stance_gap (-0.62) and rstar_proxy (1.88).
• Complementary datasets: US Treasury Yield Curve (4) and Credit Conditions (5).