Fig. 3

Probability of nominal stability. The grey areas show the posterior probability that the nominal trend is above or below of today’s definition of nominal stability (\(P[\underline \tau < \tau _{t}< \overline \tau |\mathbf {y}]\)). The area in between gives the probability of nominal stability. This definition differs among the various indicators. For CPI inflation, the official target range amounts to [0%, 2%], whereas, for the other indicators, no official target ranges exist. To account for the fact that the indicators have different trend growth rates, the CPI target range is adapted by subtracting the average growth rate of the CPI and adding the average growth rate of the various indicators. To obtain a stability range that would be applied in practice, the numbers are rounded to half a percentage point for the WPI ([− 0.5%,1.5%]), the GDP deflator ([0%,2%]), and nominal GDP ([2.5%,4.5%])