ECB: Nominal Neutral Range 1.75-2.25%, But Large Estimation Uncertainties
Feb-07 12:00
The nominal neutral rate of interest in the eurozone was likely in a range of 1.75% to 2.25% as of Q4 2024, according to ECB staff.
- In a briefing prepared for the January Governing Council meeting and published as an ECB Economic Bulletin Friday, staff said "estimates of the nominal r* from the most recent interval range between 1.75% and 2.25%". However, given the large estimation uncertainties, "such ranges should be viewed as merely indicative and alternative methodological ranges were offered”.
- Although the bulletin is not formally adopted by the Governing Council, President Lagarde and Executive Board member Cipollone have used the new indicative range in recent communications as opposed to the previous estimated range of 1.75% to 2.50%.
- Despite the uncertainties in measuring r*, estimates still suggest it has ticked up in the post-pandemic environment, although they continue to be measurably below those prevailing before the global financial crisis, pointing to still lingering lower-bound risks in the event of sufficiently large disinflationary shocks.
- In the 2024 staff report on r*, an indictive post pandemic increase of 30bp was highlighted.
- The 2025 report does not point to a specific level, but given the current ranges, is not believed to be significantly different.
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- TYH5 trades at 108-03 (-02+) whilst cumulative volumes of 370k are reasonable but not particularly elevated.
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- Data: Headlined by weekly jobless claims brought forward a day early plus ADP employment.
- Fedspeak: Waller (0800ET), FOMC minutes (1400ET) – see STIR bullet.
- Note/bond issuance: US Tsy $22B 30Y re-open - 912810UE6 (1300ET)
- Bill issuance: US Tsy $64B 17W bill auction (1130ET)
PIPELINE: Corporate Debt Roundup: $6B World Bank 7Y Priced Earlier
Jan-08 11:56
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- 01/08 $6B *World Bank 7Y +54
- 01/08 $Benchmark Ontario 5Y SOFR+58
- 01/08 $Benchmark Kommunalbanken 5Y +48
- 01/08 $Benchmark Indonesia 5Y 5.65%a, 10Y 5.95%a
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