If income spreads decline, this can also lead to lower global saving. When saving declines, this can put further upward pressure on global real interest rates, as the competition for savings can be expected to increase among those wanting to invest in new production technology. This can have significance for the development of the real interest rate. Finally, there is the question of monetary policy. Will it be conducted with an inflation target? And, if so, what level will the target have? Nominal interest rates will become higher in the future The demographical changes we can see ahead indicate that global saving will decline. This would imply higher global real interest rates. The future conditions for growth are more  6  BIS central bankers’ speeches  uncertain, but if labour productivity were to begin to increase faster than today, there would be further upward pressure on global real interest rates. Let us therefore say that future global real interest rates will be in the order of 1.5–2.5 per cent. If we add to this an inflation target and inflation expectations of 2 per cent in Sweden, we get nominal interest rates of 3.5–4.5 per cent. Even if we do not see a return to the nominal interest rate levels we previously regarded as normal, long-term nominal interest rates will be much higher than they are today. The important thing is that economic agents who now make decisions with long-term consequences bear this in mind.
More pensioners can in the long run lead to lower saving and thereby a higher real interest rate On the other hand, the saving may decline gradually as an increasingly large percentage if the world population attain the age of retirement. However the speed and strength of the impact that demographics will have on savings is uncertain. It depends partly on the extent to which older people choose to remain in work for longer and to what extent those who work save more for their retirement when their life expectancy rises. Greater income disparities also affect propensity to save Another factor that can explain why the propensity to save has increased is the increased income spread. In most developed countries, income spreads have increased since the 1980s. High-income earners normally have a higher propensity to save than low-income earners. The increase in the income spread could therefore have meant that saving has increased. At the same time, it should be said that even if income disparities have increased within a number of countries, they have declined on a global level in that the emerging markets are catching up with the developed economies. It is therefore difficult to say how global saving has been affected. Wages as a share of added value have declined The greater income spreads are also visible in other ways. The trend towards increased saving has been so extensive that wealth has risen substantially in most industrial nations.