The$$ medium$-$run equilibrium is characterized by four$$ conditions:

$1.$ Output is equal to potential output Upper Y equals Upper Y Subscript n and the real policy rate r Subscript n must be chosen by the central bank$$ so:

$2.$ The unemployment rate is equal to the natural rate u equals u Subscript n$.$

$3.$ The real policy interest rate is equal to the natural rate of interest r Subscript n where r Subscript n is defined as the policy rate where Upper Y Subscript n Baseline equals Upper C left parenthesis Upper Y Subscript n Baseline minus Upper T right parenthesis plus Upper I left parenthesis Upper Y Subscript n Baseline comma r Subscript n Baseline plus x right parenthesis plus Upper G$.$

$4.$ The expected and actual rate of inflation pi Superscript e is equal to the anchored or target rate of$$ inflation, pi overbar. This implies the nominal policy rate i equals r Subscript n Baseline plus pi overbar.

The IS relation is Upper Y equals Upper C left parenthesis Upper Y minus Upper T right parenthesis plus Upper I left parenthesis Upper Y comma r plus x right parenthesis plus Upper G$.$ Suppose r Subscript n is $2\%.$

If x increases from $2$ to $3\%,$ how must the central bank change r Subscript n to maintain the existing$$ medium$-$run equilibrium?