Explicit Neutral Rate (r*) Proxy Signal

Signal Summary:

• Configuration statement: Given a stance_gap of -0.94, a rising rstar_proxy, and a positive neutral_drift, this setup aligns with Upward-biased price paths and Indeterminate volatility, where the dominant risk is Regime shift, not Mean reversion. (1)
• The signal is in a materially accommodative state, characterized by an expansionary regime bias as the real policy rate remains significantly below the market-implied neutral rate. (1)
• Conviction Band: Medium; Interpretation Confidence: Low Confidence; Internal Conflict Flag: No. Signal Stability Assessment: Improving; Threshold Proximity: Far; Revision Sensitivity: Unknown.

Methodology Applied:

• A stance_gap ≤ -0.50 indicates policy is materially accommodative and supportive of risk assets. (1)
• Neutral_drift > +0.10 signifies a rising market-implied neutral rate, which reduces effective restrictiveness. (1)
• Negative stance gaps imply an accommodative/expansionary regime bias. (1)
• Explicit Neutral Rate (r*) Proxy Signal (latest observation: 2026-05-22). (1)

Key Dynamics:

• The primary driver is the stance_gap (-0.94), which reinforces the materially accommodative classification. (1)
• The rising neutral_drift (+0.10 threshold) indicates the market is pricing a higher long-run neutral rate, deepening the accommodative impulse. (1)
• Conditional Invalidation: The stance_gap rising above -0.50, signaling a shift toward a neutral policy stance. (1)
• The signal shows high persistence, with the stance_gap remaining accommodative throughout the provided history. (1)

Scenario Balance:

• Base case dominant: Accommodative policy supports growth and risk asset expansion. (1)
• Upside risk: Sustained rising neutral drift supports a "higher-for-longer" economic resilience narrative. (1)
• Downside risk: Materially accommodative conditions lead to persistent inflation, forcing a sharp policy reassessment. (1)

Time Horizon & Aggregation:

• Time Horizon: Cyclical (months), reflecting the lead-lag structure of policy rates relative to long-term neutral proxies. (1)
• Aggregation Weight Hint: Medium, as the stance_gap is significantly beyond the accommodative threshold. (1)

Macro Relevance:

• The signal informs the liquidity and pricing dimensions by measuring policy restrictiveness. (1)
• The implied economic mechanism is a demand impulse via low real borrowing costs relative to neutral. (1)
• Cycle position: Not determined.

Regime Context:

• Persistent accommodative regime; the rising neutral drift indicates a strengthening of the expansionary bias. (1)
• Direction of change: Strengthening accommodativeness as r* rises while policy remains lagged. (1)

Model Limitations:

• Market-implied real yields contain liquidity and risk premia that may distort the pure r* signal. (1)
• A 10-year horizon for neutral rates may mismatch near-term policy adjustments. (1)

Data & References:

• Explicit Neutral Rate (r*) Proxy Signal (2026-05-22). (1)
• Most influential: stance_gap (-0.94) and neutral_drift (Rising). (1)
• Public datasets: 10-Year Treasury Real Yields and Federal Funds Effective Rate.