That being said, this measure is also subject to 4  BIS central bankers’ speeches  significant shortcomings. First, removing premia rests on a model and results are usually very sensitive to model specifications. Second, whereas the focus is on the expected real rate in the distant future, this is the part of the model exercise that may be particularly uncertain.
[11] Third, market expectations cannot measure the equilibrium real rate per se, but only the market perception of it, which can be exposed to bouts of excessive optimism or pessimism. Estimates of the real equilibrium interest rate Beyond what can be observed in the markets, it is thus important for monetary policy to estimate a long-term real equilibrium rate.