It pointed out that the real interest rate
of bank deposit reflects the real returns for the persons who lend and deposit money at banks after removing the effects of the inflation to reach 5.59 percent in August 2019 against 13.2 percent in August 2017.
'Primary reason for this increase is to keep the real interest rate
positive in light of rising inflation during 1QFY20 on the back of increase in prices of electricity and gas,' he said.
It has also taken into account the rationalisation of tariffs and duties and the narrowing real interest rate
as it declined to 1.6 per cent in comparison with the four-year average of 2.85 per cent earlier.
It takes a heroic disposition to assume that this magic number exists or that, even if it does, our collective endeavors will result in an actual real interest rate
close to it.
The goal of this article is to ask whether monetary policy is a cause of the low real interest rate
on safe assets since the onset of the 2007-08 financial crisis.
The authors measure the real interest rate
that has a neutral effect on the NBU monetary policy.
Keywords Natural real interest rate
* Markov switching * Monetary policy rules
About half of the 1.56-percentage-point rise is attributable to an increase in the real interest rate
, as measured by the inflation-indexed ten-year Treasury bonds, whose expected real yield has risen from zero in July 2016 to 0.82 per cent now.
The real federal funds rate and the real interest rate
on 3-month Treasury bills have been consistently negative since December 2008.
Since the residuals showed on figure 2 are stationary, and the estimated equation has theoretical grounds (real interest rate
parity), the possibility of spurious regression is ruled out, but we could be potentially missing a cointegration relationship between the variables.
The cause of the secular fall in the real interest rate
over the past 35 years, that Summers noted, is a matter of dispute, particularly when the share of profits is tending to increase.