That the actual federal funds rate has to be so low for the Fed to meet its objectives suggests that the equilibrium interest rate--that is, the federal funds rate that will prevail in the longer run, once cyclical and other transitory factors have played out-has fallen.
2 Let me turn now to my main focus, namely an assessment of why the equilibrium interest rate is so low. To frame this discussion, it is useful to think about the real interest rate as the price that equilibrates the economy’s supply of saving with the economy’s demand for investment.