Since it is difficult to cut nominal interest rates below zero, conventional monetary policy is more likely to be constrained at low levels of the natural interest rate. The higher the natural interest rate, the more space central banks have to cut policy rates in response to an economic downturn, easing the conduct of conventional policy. Conclusion So where does this discussion leave us?
My assessment of the current state of the economy is optimistic. I also think there is a real possibility that some of the factors that have been holding back growth in recent years could shift, moving the economy onto a higher growth trajectory. That said, I currently see this shift more as a clear possibility than an unarguable reality.