Twice a year we undertake an analysis of real interest rates for our publications Consensus Forecasts – G7 and Western Europe 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 – G7 and Western Europe | 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 Nov 2025 Consensus Forecasts – G7 and Western Europe survey), together with some written analysis from the same publication.
Our analysis of real, i.e. inflation-adjusted, interest rates in 12 of the world’s industrialised economies compares current, inflation-adjusted 10-year government bond yields (see table, top) with those surveyed on May 12, 2025 (chart, above). The charts on page 29 illustrate the longer-term evolution of real & nominal interest rates, alongside our panels’ 10-year rolling inflation forecasts from 1998 until now. These yields were on a steady downward trajectory in the 2010s during an era of quantitative easing and zero-bound interest rates. But in early 2022 as inflation pressures took hold, bond traders priced in longer-term inflation risks, tightening financial conditions. Page 29 charts reflect that 2022 peak in inflation premium.
Inflation rates have subsided somewhat since then (except for Japan where long-term inflation projections have mostly stayed on an upward trajectory, pricing in higher structural inflation). As a result, most G7 central banks (except the Bank of Japan) have tried to reverse policy-rate increases. Unlike inflation, nominal bond yields have not subsided and remain elevated. Even with inflation over the 2026-2035 period conforming toward 2% inflation targets, yields for the UK are the highest for both nominal and real (inflation-adjusted) yields, underscoring the risk premium associated with its inflation and fiscal sustainability. German, French, Italian and Spanish nominal 10-year bonds remain above 2% as markets expect greater demands on fiscal spending, and in turn debt issuance. Ageing demographics will demand more welfare and healthcare outlays, and suggest lower growth amid smaller taxpaying bases. Europe and Japan must also rebuild military capabilities, and this will require financing. Consequently, countries’ taxation burdens are the subject of increased debate, as they risk chasing away further payers into the public welfare system. In the US, greater debt issuance is likely as OBBB legislation slashes Federal spending and tax rates. Bondholder apathy for 30-year auctions in the US and Japan sum up concern over longer-term dynamics. Despite keeping yields very low in recent decades, interest payments on Japan’s large debt load have risen, prompting greater scrutiny of government spending plans. Nevertheless, both Japan and Switzerland (the latter with its weak inflation and safe-haven currency) are looking at negative real yields.
A portion of text from Consensus Forecasts – G7 and Western Europe, Nov 10, 2025.