The neutral level of nominal 90-day rates looks to have fallen to around 4½ percent, though there is a confidence band around that figure. Based on the uncertainty we’ve typically found in the past, the band might be in the order of ½ percentage point each side of the central estimate.
We have lowered the view of neutral 90-day rates in our forecasting framework in line with that (figure 1). That estimate compares with figures in 2003 of somewhere between 5½ and 6¼ percent. At the same time, we have reduced our view on the neutral lending rate for households and businesses by less only about 1 percentage point.