With our lower growth rate and a higher savings rate around the world, we note that the neutral rate, the neutral interest rate, is lower. We have questions about the fact that, with a target inflation rate of 2%, there is a greater likelihood of an interest rate that is close to zero or even negative. In the end, we estimated that it was essentially twice that.
We now believe that the lower interest rate is at minus 50 basis points, whereas we thought it was at plus 25 basis points during the crisis. The probability of achieving the lower interest rate and employing conventional monetary policy means that we have consolidated the possibility of increasing the target inflation rate to 3%.
Upon closer examination, we concluded that the costs by far outweighed the possible benefits. It is very intuitive. We have a tax system and the ability to transfer wealth between savers and lenders, but an increase in the inflation rate means that lower-income or older people must bear the cost of that increase.
In this context, we considered employing unconventional tools. Their effects are limited but positive nonetheless. Some studies show that they do work. It is preferable to keep the inflation rate relatively low, stable and predictable.