MNI BRIEF:Neutral Rate Little Changed From Pre-Covid-ECB Staff
ECB staff note the neutral rate of interest was recently estimated to be around zero, Economic Bulletin notes.
The eurozone's natural real rate of interest has recently been estimated to be around zero, or similar to pre-pandemic levels, ECB staff noted in the bank's latest Economic Bulletin.
However, the staff note that a "suite of models and approaches for gauging r* produces a wide range of estimates, reflecting a high degree of uncertainty". Since the second half of 2023, estimates obtained from term structure models and semi-structural models have ranged between about minus three-quarters of a percentage point to around half a percentage point, the Bulletin stated.
In an interview with the FT published on Wednesday, Executive Board member Isabel Schnabel said r-star is "conceptually very important for the appropriate calibration of monetary policy. The problem is, it cannot be estimated with any confidence, which means that it is extremely hard to operationalise". (MNI INTERVIEW: ECB At Risk Of Overtightening - Suedekum)