The general view among economists, as we noted above, is that structural economic forces have driven the natural rate down over time, and the Fed has had to adjust monetary policy by following this trend. Otherwise, the Fed would have kept interest rates above the natural rate for a long time, which could have led to a deflationary spiral. According to this theory, the Fed must simply follow the trend in real interest rates.

Hillenbrand (2023) assumes that the structural drivers are fundamentally responsible for the trend in interest rates but offers an explanation as to why the trend is captured by interest rate changes around monetary policy meetings.^[15] See Hanson and Stein (2015), Hanson, Lucca and Wright (2021) and Hillenbrand (2023) for a discussion of alternative explanations for the sensitivity of long-term interest rates to changes in shorter-term interest rates. According to Hillenbrand (2023), investors learn about the trend decline in nominal and real interest rates precisely in connection with the Fed meetings. This may be because the market is learning important information about the long-term level of interest rates from the Fed. It may also be because Fed meetings play a coordinating role in financial markets and investors gather information, or trade, based on their information, especially around Fed meetings. Hillenbrand calls this hypothesis "Long-term Fed guidance", reflecting the idea that the Fed's actions and communications can provide guidance to markets on the long-term level of nominal and real interest rates.

According to Hillenbrand (2023), the Fed, through its position and resources, can provide information on the natural rate even if it is (as the Fed itself believes) outside the Fed's control.^[16] See, for example, Powell (2018). To estimate its level, most models therefore rely on observing the effects of monetary policy. Thus, by closely monitoring the effect of interest rates on the economy, the Fed, according to this hypothesis, gets an idea of the natural interest rate. This may give the Fed an advantage over many market participants who may not have the same resources or sufficient financial incentives to analyse the impact of interest rates on the economy. Thus, the Fed cannot influence the trend itself but takes it into account when making monetary policy decisions. These decisions spill over to market participants' information on long-term interest rate levels precisely in the context of monetary policy decisions.