Real Interest Rate Forecasts

Twice a year we undertake an analysis of real interest rates for our publications Consensus Forecasts and Asia Pacific Consensus Forecasts (in May and November) and the resulting tables and analysis are displayed in both the hard-copy and PDF versions of the publications. Our analysis focuses on both short-term and long-term interest rate expectations.

 

Consensus Forecasts Asia Pacific
Consensus Forecasts
United States Canada Australia New Zealand
Japan Netherlands China Philippines
Germany Norway Hong Kong Singapore
France Spain India South Korea
United Kingdom Sweden Indonesia Taiwan
Italy Switzerland Japan Thailand
Malaysia

 

The table below shows a portion of the data from one of our surveys for 10-Year Real Interest Rates (from our November 2017 Consensus Forecasts survey), together with some textual analysis from the same publication.

 

 

Real Interest Rates

From a longer-term historical perspective, an economic paper published last year by the US Federal Reserve Bank of Minneapolis, Real Interest Rates over the Long Run, showed that long-term interest rates in the G-7 have all been converging toward very low levels since the 1980s. The drop in real rates generally, it seems, is not so much due to the Great Recession or the 2001 downturn; part of the convergence in rates represents increased integration in the global financial system. The downward trend in global fixed investment is also a factor. The authors indicate that there is a higher likelihood of nominal long-term interest rates hitting the zero lower bound. Why are these conclusions important? Because real long-term rates affect household decisions on mortgages and car loans, not to mention businesses regarding building new factories and investing in capital. The chart compares real interest rates with estimates from our survey six months ago. Both one-year and 10-year aggregated inflation projections have barely changed from our May 2017 survey, and that has translated into little movement in inflation-adjusted interest rates for many countries. Despite a mostly-weak inflation environment, nominal yields have dropped even lower: 10 of the 12 countries shown still have real rates at or below 0%.

A portion of text from Consensus Forecasts – G7 and Western Europe, November 6, 2017.