The real longterm interest rate gap has become equally important over time. Although there is considerable uncertainty regarding real equilibrium rates, let alone their term structure, ECB staff estimates suggest that the gap between the actual real ten-year rate and the estimated real ten-year equilibrium rate is likely to be highly significant, even when accounting for model uncertainty (left chart, slide 6).
Monetary policy has thus managed to remain highly accommodative despite the steady decline in equilibrium rates over time (right chart, slide 6). [7] A policy that commits to preserving such a degree of accommodation provides measurable support to aggregate demand and hence underlying price pressure. There are, however, instances where rising rates would unduly tighten our policy stance.