These tools have been used by a number of central banks in the past four years as a means of providing additional monetary policy stimulus once the overnight interest rate approached zero and hit its effective lower bound. For more information, see the appendix of the Bank’s April 2009 Monetary Policy Report.
Current estimates of the neutral rate are well below pre-crisis levels—a phenomenon that may reflect slow productivity growth, subdued economic growth abroad, strong demand for safe longer-term assets, and other factors. The Committee anticipates that the depressing effect of these factors will diminish somewhat over time, raising the neutral funds rate, albeit to levels that are still low by historical standards.