This is a consequence of free international capital flows and the fixed exchange rate policy. (Graph 3 – Actual and natural real interest rates). Nominal rates are low, partly due to the fact that inflation is low. However, real interest rates are also low. The estimation of the natural real interest rate - called r* (r star) - is currently a hot topic.
r* is the real interest rate level that brings actual economic activity in line with potential economic activity. r* is not directly observable and can only be estimated with some uncertainty. However, it is relatively well established in the literature, that r* has followed a declining trend over the past couple of decades.