One could presume that the forward real rate of interest implied by yields on longerterm indexed debt - or the real return provided, say, over the period five to ten years from now conveys a sense of market participants’ view of the long-run equilibrium real interest rate.3 Unfortunately for such an inference, however, longer-term yields embody expectations of future interest rates, a term premium, and potentially a premium for the relative illiquidity of these instruments, so this technique will provide an overestimate of the equilibrium real rate.
4  BIS Review 124/2009  – that we aggressively cut interest rates to support the economy and thus, achieve our 2 per cent inflation target. Financial instability can also affect the monetary policy transmission mechanism.