The neutral cash rate – lower than in previous cycles

Changes in productivity, the terms of trade, savings behaviour, fiscal policy, credit growth, lending margins and theexchange rate impact on the neutral cash rate.

This note discusses each of the factors that affect the neutral cash rate to explain why we believe it is lower now than inprevious cycles.

We estimate the current neutral policy cash rate to be 3½% (3-4% range).

Read the full report: Economic Research

 

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