The natural rate of interest Interest rates in the euro area and in other advanced economies are presently lower than what they used to be prior to the global financial crisis. This phenomenon, visible through the term structure of interest rates, is partly policy-induced, but it is also likely that the so-called long-term equilibrium real interest rate has declined.
The natural rate of interest can be defined as the real interest rate that is consistent with the macroeconomic equilibrium. It is the real interest rate that would prevail if the economy were at the equilibrium employment, the output at its potential level, and the inflation stable – neither accelerating nor decelerating.