Answer: Below 1.0%.

When the policy rate exceeds the neutral rate, monetary policy is contractionary; conversely, it is expansionary when the policy rate is below the neutral rate. The neutral rate is calculated as the sum of the trend growth rate and the inflation target. For the policy rate (1.5%) to be higher than the neutral rate, the inflation target must be less than 1.0%. This ensures the policy rate remains contractionary. Options B and C are incorrect because they do not satisfy the condition for contractionary monetary policy.

Author: LeetQuiz Editorial Team