Because a persistently low neutral rate implies less room for conventional monetary policy to adjust to adverse developments, it will be important to assess whether our current policy tools are adequate to respond to negative shocks and, if not, what adjustments would be most appropriate.
There is a growing literature on such policy alternatives, such as raising the inflation target, moving to a nominal income target, or deploying negative interest rates.15 These options merit further assessment. However, they are largely untested and would take some time to assess and prepare.