There has been a growing consensus in the market and within the Fedthat the Fed will raise rates in the near term but not get very far. Thisexpectation has been fueled, at least in part, by a view that r-star iscurrently very close to zero and is unlikely to rise substantially from theselevels. We assess how much confidence there should be in this view.    Our analysis suggests that there is considerable uncertainty around r-starestimates, and we should therefore have limited confidence that r-star iscurrently very close to zero. This conclusion is based on several findings:(i) there is considerable disagreement across different metrics, includingthose that use similar methodologies; (ii) the inherent uncertainty of rstarestimates due to the estimation process; (iii) the tendency for r-starestimates to be revised substantially over time; and (iv) the fact thatestimates are sensitive to one-off shocks to inflation, such as the sharpdecline in wireless services prices earlier this year.    Despite this uncertainty, we argue that r-star estimates are likely torise modestly in the coming quarters. The dissipation of a number ofheadwinds, which have raised savings relative to investment and havethus depressed r-star in recent years, should support some updrift in theneutral rate. We suggest that household income growth expectations,which have risen in recent quarters, are a good summary statistic for theseheadwinds. Our own simulations of a popular Fed model of r-star alsosupport this conclusion.    R-star values in the range of 0 to 75bp currently and 25 to 100bpthree years hence seem to be reasonable in light of the uncertainty weshowcase here. And given the strength in the economy, the drag fromone-off inflation surprises, and the propensity for r-star estimates to besubsequently revised upward, we would not be surprised to find that rstarestimates are revised up several years in the future.

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