rates reflect decline in equilibrium real rate of interest understanding the decline in r *. the decline in r * reflects that from a global perspective, desired savings have risen relative to desired investments. 1 but as we cannot interact with mars, realised investment must equal realised savings at the global level. this means that in equilibrium, interest rates have declined. changing demographics have been identified as a key factor behind the decline in r *. in particular, an ageing population is found to have been driving up desired savings, thereby pushing down equilibrium interest rates. moreover, the decline in productivity growth that has been observed in many advanced economies since the 1990s may have reduced the incentive for firms to invest in new equipment. at the same time, slower productivity growth and hence slower growth in earnings may have contributed to higher household savings rates. if a household expects its incomes to increase substantially it has less incentive to save for the future. from that logic, weaker growth in incomes will tend to increase savings, putting downward pressure on r *. the distribution of income and wealth across individuals is also a potential factor behind the decline in equilibrium interest rates. 2 in a number of countries, the distribution of wealth in particular has become more uneven. as the wealthiest part of the population typically has a lower pro - se e. g. claus brand, marcin bielecki and adrian penalver ( editors ), 2018, the natural rate of interest : estimates, drivers and challenges to monetary policy, ecb occasional paper no. 217, and the references therein. see e. g. larry summers, 2014, us economic prospects : secular stagnation, hysteresis, and the zero lower bound, business economics, vol 49 ( 2 ), national association for business economics. page 2 of 7 pensity to consume, this has contributed to an increase in global desired savings and hence a decline in r *. we observed a pronounced decline in estimates of r * in the immediate aftermath of the financial crisis. this is likely to reflect that the financial crisis led to a general reassessment of risks among firms and households in many countries, prompting them to deleverage. with a more cautious approach to savings and spending, r * must fall. this has been corroborated by stricter financial regulation that was implemented in response to the crisis. the link between financial regulation and interest rates goes two ways. while a more prudent approach to spending and savings may have reduced equilibrium interest rates, an extended period

exchange rate policies, on which we exchange views. our two institutions also have to manage a growing pool of official foreign reserves in a global market that is increasingly uncertain. the opening of snb ’ s singapore branch is an important milestone in the strong friendship and good relations between singapore and switzerland, and between mas and snb. through this branch, our two institutions will come even closer together and i look forward to new areas of cooperation. bis central bankers ’ speeches we value highly our relationship with snb. working with snb over the last ten months to set up this branch has been a real delight for mas. you are clear in your objectives, methodical in your approach, and always gracious and understanding in your dealings. thomas, you will always have the full support of my colleagues and i at the mas, as snb grows its presence here. once again, please accept my congratulations on the opening of your branch. have an enjoyable evening ahead! bis central bankers ’ speeches