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Estimating New Zealand’s neutral interest rate

Adam Richardson, Rebecca Williams

The neutral interest rate is an important concept in monetary policy decision making, helping the Reserve Bank understand the extent to which current policy settings are either contractionary or expansionary with respect to the macroeconomy. This note outlines the range of technical approaches the Reserve Bank uses to estimate the nominal neutral 90-day bank bill rate. These approaches help inform the monetary policy judgements of the Bank’s committees.