European Central Bank chief economist Philip Lane says the “neutral” interest rate—the level that neither stimulates nor restrains economic growth—has moved higher. Lane indicates the upper range of that neutral rate has crept up to about 2.5%. In his remarks, he suggests that setting policy rates at the current level or slightly higher would not automatically act as a drag on the economy if the neutral rate is indeed higher than previously estimated. The comments point to the possibility that monetary policy may need to be assessed relative to a revised benchmark for neutrality, rather than assuming the neutral rate has stayed unchanged. Both outlets report Lane’s view that the upper bound for neutrality is around 2.5%, and they link this to the implication that another interest-rate increase would not necessarily be restrictive in its economic effect. The reporting does not provide additional figures, policy decisions, or new data beyond Lane’s characterization of the neutral-rate range.
ECB’s Philip Lane Says Neutral Rate Upper Range Has Risen to 2.5%
European Central Bank chief economist Philip Lane says the “neutral” interest rate—the level that neither stimulates nor restrains economic growth—has moved higher. Lane indicates the upper range of t...
- ECB chief economist Philip Lane says the neutral rate’s upper range has risen to about 2.5%.
- Lane characterizes the neutral rate as having “crept up,” implying prior estimates were lower.
- He suggests another interest-rate hike would not yet act as a brake on the economy.
- The remarks focus on how policy should be judged against a revised neutrality benchmark.
European Central Bank Chief Economist Philip Lane said the neutral rate of interest could be as high as 2.5%, suggesting another hike won’t yet act as a brake on the economy.
14 hours agoEuropean Central Bank Chief Economist Philip Lane said the neutral rate of interest could be as high as 2.5%, suggesting another hike won’t yet act as a brake on the economy.
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