FOMC Summary of Economic Projections & Neutral Rate R-Star

Every quarter, the Federal Open Market Committee releases its Summary of Economic Projections (SEP), including the influential interest rate dot plot. Central bank liquidity analytics in the Federal Reserve FOMC interest rate decision dot plot playbook dissect why upward revisions to the neutral rate (r*) reshape long-term equity valuations.

The neutral interest rate—often designated as r-star (r*)—represents the theoretical short-term policy interest rate that neither stimulates nor restricts economic growth under conditions of full employment and stable 2% inflation.

As policymakers raise their estimates of r-star in response to massive fiscal deficits, structural reshoring capital demands, and green energy transition expenditures, the entire risk-free yield curve shifts higher, permanently compressing price-to-earnings multiples across high-multiple growth equities.