Board of Governors of the Federal Reserve System

April 09, 2025

Real-Time Global Longer-Run Neutral Rates

Thiago Ferreira, Mitch Lott, and Keith Richards

Data: CSV | Data Definitions (PDF)

On April 10, 2025, a correction was made to fix a reference from Samer and Shousha (2023) to Ferreira and Shousha (2023) in paragraph three.

In this note, we provide updated real-time estimates for global longer-run real neutral interest rates – the real component of policy interest rates consistent with both economic activity and inflation at their longer-run trends. We use the methods from Davin and Ferreira (2022) and Ferreira and Shousha (2023) for the same variety of economies. During tightening or easing monetary policy cycles, these longer-run neutral rates serve as reference for the level at which policy rates may settle by the end of these monetary cycles. As these authors, we provide the decomposition of changes in neutral rates of 11 advanced economies into the following drivers: safe asset supply, safe asset demand, trend of convenience yield, trend of productivity growth, working age share, global spillovers faced by each economy from the rest of the world's productivity and demographic developments, and other factors.¹ These are the authors' own estimates based on their research and should not be regarded as any official Fed view on the value of neutral interest rates.

Beginning with the publication of this Note, we will provide updated real-time estimates of longer-run neutral rates every month based on the latest data available for the following economies: United States, euro area, United Kingdom, Canada, Japan, Australia, Denmark, Norway, New Zealand, Sweden, and Switzerland. As of this publication, semi-annual data are available for the period from 1960:H1 2025H1, and future time periods will be added as incoming data becomes available.² In general, we will aim to have the updated series posted sometime after 10:00 a.m. on the fourth business day of each month. These estimates are subject to delay, revision, or methodological changes without advance notice.

Relative to Ferreira and Shousha (2023), there are data and methodological changes worth highlighting.³ First, data on productivity growth from the original sources are only updated once a year, with many months of lag in their release. To allow our estimates to be more timely, we splice these productivity series with those available from national statistic offices, whenever the later data are available. Additionally, data on productivity growth is often subject to substantial revisions, both from national statistical offices and the original cross-country references.

The second source of changes is the methodology of the calculation of the trends of productivity growth and convenience yield. Because we measure these trends using a Hodrick-Prescott filter, end-of-sample trend values may be sensitive to the last observations of the underlying data. To alleviate this issue, we forecast productivity growth and convenience yield up to 4 years ahead using a rolling 25-year window, then, and only then, we estimate the trends of these variables using the full sample (history and forecast). Because of these data and methodological changes relative to the original calculation of Ferreira and Shousha (2023), users of the neutral rates data should take note that the entire history the neutral rates may revise each month.

References

Davin, C., & Ferreira, T. R. T. (2022). Longer-run neutral rates in major advanced economies (No. 2022-12-01). Board of Governors of the Federal Reserve System (US).

Ferreira, T. R., & Shousha, S. (2023). Determinants of global neutral interest rates. Journal of International Economics, 145, 103833.