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BOE: New Estimates of Neutral Rate

BOE
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Also worth noting here that the neutral rate has been re-estimated by the BOE here, but they are a little vague as to the interpretation. Depending on which you pay attention to is has increased by 25-150bp from the previously estimated 2-3% range.

  • "The August 2018 Inflation Report set out analysis of the equilibrium interest rate, which pointed to it being in the 2%–3% range in nominal terms in the long run."
  • "Evidence suggests that R* is likely to have increased modestly, but that there is significant uncertainty around the range of estimates at any point and the extent of any increase. As a result, while Bank Rate may be reduced further as inflationary pressures fade, absent new disinflationary shocks it is unlikely to fall back to its pre-pandemic lows."
  • "Macroeconomic models monitored by Bank staff suggest a modest increase in R* of around 25 to 75 basis points relative to the estimates published in the August 2018 Inflation Report.
  • "Financial market-based measures suggest that R* may have increased to a greater extent, by over 90 basis points since 2018."
  • "Survey-based measures of equilibrium interest rates also point to an increase in R*. For example, the Bank of England’s Market Participants Survey asks respondents for views on the level of Bank Rate at which monetary policy is neither expansionary nor contractionary. This measure has increased by 150 basis points in recent years. However, it is difficult to judge the extent to which these responses reflect perceptions of long-run R*."
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Also worth noting here that the neutral rate has been re-estimated by the BOE here, but they are a little vague as to the interpretation. Depending on which you pay attention to is has increased by 25-150bp from the previously estimated 2-3% range.

  • "The August 2018 Inflation Report set out analysis of the equilibrium interest rate, which pointed to it being in the 2%–3% range in nominal terms in the long run."
  • "Evidence suggests that R* is likely to have increased modestly, but that there is significant uncertainty around the range of estimates at any point and the extent of any increase. As a result, while Bank Rate may be reduced further as inflationary pressures fade, absent new disinflationary shocks it is unlikely to fall back to its pre-pandemic lows."
  • "Macroeconomic models monitored by Bank staff suggest a modest increase in R* of around 25 to 75 basis points relative to the estimates published in the August 2018 Inflation Report.
  • "Financial market-based measures suggest that R* may have increased to a greater extent, by over 90 basis points since 2018."
  • "Survey-based measures of equilibrium interest rates also point to an increase in R*. For example, the Bank of England’s Market Participants Survey asks respondents for views on the level of Bank Rate at which monetary policy is neither expansionary nor contractionary. This measure has increased by 150 basis points in recent years. However, it is difficult to judge the extent to which these responses reflect perceptions of long-run R*."