5  explanation for weaker inflationary pressure, as fewer employees are switching employers for pay-rises.7  Policy implications of changing inflation dynamics So if those structural and cyclical stories capture our understanding of why inflation has been so low, what changes have we made as policy makers in our approach to setting monetary policy?
I would like to talk about two changes to inflation dynamics that we have incorporated into our approach over recent years, and one area where our assessment is that inflation dynamics have not changed – the effectiveness of monetary policy. The neutral interest rate The first change is that we have lowered our estimate of the neutral interest rate.