The writer is an FT contributing editor

The successive shocks we’ve experienced over the past three years have had a lasting impact on the global economy. But according to John Williams, president of the New York Federal Reserve, and his co-authors Kathryn Holston and the late Thomas Laubach, the economy may not have transformed as much as we think. They find no evidence suggesting that the pandemic and Russia’s war in Ukraine have ended the era of low inflation and interest rates in the US, Canada and eurozone over the medium term. But I would pause before breathing a sigh of relief.

For over 20 years, Williams and company have been estimating the long-run neutral (or natural) rate — known to economists as r-star. This is the interest rate at which the economy is humming along at its potential, with full employment and inflation at 2 per cent. R-star is a guiding light for central banks. Interest rates above it mean the monetary policy stance is restrictive, and below it, accommodative.