LIVE MARKETS-Neutral rate: time to let go

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com.

NEUTRAL RATE: TIME TO LET GO

Markets had been rather obsessed with the Ras they needed an anchor for their bets on future ECB moves after the central bank raised rates to levels not seen since the early 2000s.

However, after recent comments from ECB hawks, the R-- the so-called neutral rate that keeps the economy at full employment with stable inflation -- is looking to be a less valuable guide for ECB policy.

"The risk has always been that as central banks inch closer towards the conceptual neutral range, cyclical recoveries will demand a certain degree of patience when it comes to further policy adjustments," said Daniel Von Ahlen, economist at TS Lombard, mentioning what happened in Canada and Sweden.

"Policy rates in both Sweden and Canada are still well above the communicated lower neutral rate bound, and rhetoric has already become notably less dovish, with few indications given that further rate cuts are on the way," he argues.

"The message is clear: operationally, the ECB is not guided by any estimate of rand will discover this level empirically – i.e., by focusing on tangible data points," he adds.

Bundesbank President Joachim Nagel recently said the neutral rate was a good theoretical concept that was not very useful for policymaking.

(Stefano Rebaudo)

EARLIER LIVE MARKETS POSTS

STOCKS TAKE A BREATHER IN A BUSY SESSION CLICK HERE

EUROPE BEFORE THE BELL: WE'D FORGOTTEN STOCKS CAN GO DOWN CLICK HERE

MORNING BID TRUMP TARIFFS TAKE SPOTLIGHT AS NVIDIA NEITHER HOT NOR COLD CLICK HERE