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Why central bankers look to the ‘stars’ when setting interest rates

By Luke Hartigan, Senior Lecturer in Economics, University of Sydney

When the topic of central banks and the outlook for interest rates comes up, economists often turn to the so-called “star” variables to help with their predictions.

What do we mean by star variables? Why they are important to central bankers, and how do they influence interest-rate decisions?

The star variables relate to key concepts in economic models used by central bankers to help them understand…

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