The lower rate environment means there will be less room to cut the federal funds rate, so that if the economy experiences adverse shocks similar in severity and frequency to those in the past the likelihood of returning to and operating near the effective lower bound will remain elevated relative to historical experience.
Our latest forecasts, however, suggest that there will be a gradual decline in the saving ratio over the next couple of years, of the same order of magnitude as we’ve already seen over the past couple of years.