[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-324488-105":59,"doc-detail-324488-en":130},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":123,"head_meta":125,"extra_data":127,"updated_unix":129},105,"en","the-neutral-rate-of-interest-have-international-developments-lowered-the-neutral-rate","The Neutral Rate of Interest - Have International Developments Lowered the Neutral Rate?","","Examines how international developments may help explain the unusual behavior of U.S. long-term interest rates and whether the neutral federal funds target rate could be lower than commonly believed. Discusses the neutral rate of interest as a real, unobservable construct tied to real savings and investment in a frictionless, fully employed economy. Argues that financial globalization and weaker worldwide investment can shift the neutral rate, affecting inflation pressures and long-term growth risks.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/the-neutral-rate-of-interest-have-international-developments-lowered-the-neutral-rate/324488/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/the-neutral-rate-of-interest-have-international-developments-lowered-the-neutral-rate/324488.png","ImageObject",300,407,{"name":92,"@type":93},"Anda","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-23","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":24},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"What is the neutral rate of interest, and why is it difficult to estimate?","Question",{"text":112,"@type":113},"It is a real (inflation-adjusted) rate that aligns real savings and real investment in a fully employed, frictionless economy. It is theoretical, unobservable, and estimation is inherently difficult.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"How can international developments affect the neutral federal funds rate?",{"text":117,"@type":113},"Because the neutral rate is not a closed-economy concept, events influencing foreign saving and investment choices can raise or lower the neutral real rate in the United States.",{"name":119,"@type":110,"acceptedAnswer":120},"What role does financial globalization play in explaining U.S. long-term interest rates?",{"text":121,"@type":113},"The document links declining worldwide investment and increased international diversification to a neutral rate that may be lower than the current policy stance, contributing to the observed low real long-term U.S. rates, framed as the “interest rate conundrum.”","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},324488,1790538073,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":24,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":143,"read_time":144,"preview_page_count":4},962075006959,"https://ap-avatar.wpscdn.com/avatar/e0002397efbe92a78e?_k=1776741047341049297","by Owen .Humpage  \nDince June of 2004,the FOMC hasincreased the federal funds target ratefrom 1 percent to 4.25 percent in aneffort to remove policy accommodation.Policymakers look to establish a targetrate that will promote long-term eco-nomic growth without generatinginflation.  \nMany economists conceptualize theFOMC's actions in terms of a neutralfederal funds target rate.In this frame-work,a funds rate below its neutral leveleventually creates inflation.A funds rateabove the neutral level suppressesinflationary pressures,but at the riskof inducing subpar economic growth.Policymakers must continually assesswhere the current federal funds rate isrelative to its neutral value.Unfortu-nately,the neutral federal funds rate isnot a constant,and economists'esti-mates of it have been notoriously impre-cise.Moreover,the neutral rate is not a\"closed-economy\"phenomenon;inter-national developments affect it.  \nDrawing on two recent InternationalMonetary Fund(IMF)studies,thisEconomie Commentary explains howinternational developments—chiefly,the lackluster performance of worldwideinvestment and the growing globaliza-tion of international financial marketshelp explain the recent unusual behaviorofU.S.long-term interest rates and sug-gest that the neutral federal funds targetrate may be lower than many believe.  \n# ■ The Neutral Rate of Interest\n\nThe neutral rate of interest is a real(orinflation-adjusted)rate that equates realsavings with real investment in a fullyemployed,competitive,and frictionlesseconomy;that is,an economy persis-tently growing at its full potential.It is a  \n# Have International Developments Loweredthe Neutral Rate?\n\ntheoretical construct,and as such,it isunobservable and difficult to estimate.  \nThe day-to-day economy,of course,contains many frictions:Prices are oftenset by contract or custom,which slowstheir response to changing economicconditions.Information typically iscostly to acquire and often takes time todisseminate,and just the act of adaptingto economic change involves resourcecosts that slow the process.As a conse-quence of these types of frictions,infla-tion-adjusted market rates can divergefrom their neutral levels following anykind ofeconomic shock,like an unantici-pated change in monetary policy,a majoroil price hike,or devastating hurricanes.  \nThe neutral real interest rate is also notconstant;it changes in response to any-thing that affects long-term real savingand investment patterns.Such things asan aging population,persistent budgetdeficits,or technological change willraise or lower the neutral real interestrate.Some changes emanate frombeyond our borders,making the neutralfederal funds rate an open-economy con-cept.In a world where obstacles to theglobalization of financial markets arerapidly dicappearing,events that affectforeign saving and investment choicescan also raise or lower the neutral realrate of interest in the United States.  \n# ■ Financial Globalization\n\nOver the past I5 years,the world haswitnessed a marked increase in the glob-alization of financial markets.Accordingto IMF estimates,gross external assetsand liabilities of industrialized coun-tries-and to a lessci extent emerging-market economies quadrupled duringthe 1990s to 200 percent of GDP by2003.While private investors in most  \nDecember 2005  \nOne way to think about monetarypolicy is in terms of a neutral federalfunds rate,one that exerts neitherinflationary nor deflationary pres-sures.Recent declines in worldwideinvestment,coupled with the growingglobalization of financial marketssuggest that the neutral rate may belower than the current stance of mon-etary policy and the stage of the busi-ness cycle may lead one to believe.  \ncountries and regions-particularly theUnited States—still exhibit a home biasin their portfolio choices,the rapidexpansion of gross extemal assets andliabilities together with other statisticalmeasures clearly suggests a trend towardgreater international diversificationAssociated with this financial","cbCaib8SPltHh0f8","https://ap.wps.com/l/cbCaib8SPltHh0f8","pdf",1110679,"English","# The Neutral Rate of Interest\n# Have International Developments Loweredthe Neutral Rate?\n# Financial Globalization\n## Global Investment","[{\"question\":\"What is the neutral rate of interest, and why is it difficult to estimate?\",\"answer\":\"It is a real (inflation-adjusted) rate that aligns real savings and real investment in a fully employed, frictionless economy. It is theoretical, unobservable, and estimation is inherently difficult.\"},{\"question\":\"How can international developments affect the neutral federal funds rate?\",\"answer\":\"Because the neutral rate is not a closed-economy concept, events influencing foreign saving and investment choices can raise or lower the neutral real rate in the United States.\"},{\"question\":\"What role does financial globalization play in explaining U.S. long-term interest rates?\",\"answer\":\"The document links declining worldwide investment and increased international diversification to a neutral rate that may be lower than the current policy stance, contributing to the observed low real long-term U.S. rates, framed as the “interest rate conundrum.”\"}]","The Neutral Rate of Interest - Have International Developments Lowered the Neutral Rate? | PDF",1789968060,13]