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BOE: Lombardelli cautions against reading too much into neutral rate estimates

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  • She talks through the different approaches before noting "you can add all that up and say perhaps we're in the region of two to four. It's very broad. I think it's really important not to sort of assume a level of certainty around that we can't be certain."
  • "It's completely sort of unknowable and observable thing, but it's an important concept we think about, and that's why we wanted to lay it out on your question of lots of different models are basically saying, do you take a weighted average of them? No, we've set them all out to show the level of different views and uncertainties out there. Depending on what model you use, depending on where you get your data from, you'll get a very, very different reading."
    "They give you a sense of the uncertainty around this concept. That's the point of it. I would really stress when we're thinking about restrictiveness, actually, we look at a much wider basket of things than this."
  • Bailey adds: "We don't judge restrictiveness just by looking at a model of r star on the neutral rate. We judge restricting this by looking at the transmission mechanism of monetary policy, and then, of course, how it affects the output gap. Since those, those are the things we observe. I mean, merely using a theoretical model. I would not be I would not advise your viewers to do that if they want to maintain a theoretical model, because it's not going to give you a very good a good read."
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  • She talks through the different approaches before noting "you can add all that up and say perhaps we're in the region of two to four. It's very broad. I think it's really important not to sort of assume a level of certainty around that we can't be certain."
  • "It's completely sort of unknowable and observable thing, but it's an important concept we think about, and that's why we wanted to lay it out on your question of lots of different models are basically saying, do you take a weighted average of them? No, we've set them all out to show the level of different views and uncertainties out there. Depending on what model you use, depending on where you get your data from, you'll get a very, very different reading."
    "They give you a sense of the uncertainty around this concept. That's the point of it. I would really stress when we're thinking about restrictiveness, actually, we look at a much wider basket of things than this."
  • Bailey adds: "We don't judge restrictiveness just by looking at a model of r star on the neutral rate. We judge restricting this by looking at the transmission mechanism of monetary policy, and then, of course, how it affects the output gap. Since those, those are the things we observe. I mean, merely using a theoretical model. I would not be I would not advise your viewers to do that if they want to maintain a theoretical model, because it's not going to give you a very good a good read."