Finally, there have been significant influences on the level of ‘neutral interest rates’ globally, including ageing populations with less propensity to consume, reduced wage bargaining leverage for workers as labour mobility and product sourcing has broadened, and declining productivity growth as technologies have matured.
On top of these long-term trends towards lower rates, adverse cyclical events - especially during and post the GFC - have driven many central banks to reduce interest rates to their effective lower bound (Figure 4) as a means to stimulate demand i.e., to continue to meet their inflation mandate.