transactions ( usit ) model, ” ifdp notes. washington : board of governors of the federal reserve system, february 8. hamilton, james d., ethan s. harris, jan hatzius, and kenneth d. west ( 2015 ). “ the equilibrium real funds rate : past, present, and future, ” nber working paper series 21476. cambridge, mass. : national bureau of economic research, august. international monetary fund ( 2014 ). “ perspectives on global real interest rates, ” chapter 3 in world economic outlook : recovery strengthens, remains uneven. washington : imf, april, pp. 81 – 112. bis central bankers ’ speeches johannsen, benjamin k., and elmar mertens ( 2016 ). “ the expected real interest rate in the long run : time series evidence with the effective lower bound, ” feds notes. washington : board of governors of the federal reserve system, february 9. kiley, michael t. ( 2015a ). “ what can the data tell us about the equilibrium real interest rate? “ finance and economics discussion series 2015 – 077. washington : board of governors of the federal reserve system, august. — — — — - ( 2015b ). “ low inflation in the united states : a summary of recent research, ” feds notes. washington : board of governors of the federal reserve system, november 23. laubach, thomas, and john c. williams ( 2015 ). “ measuring the natural rate of interest redux ( pdf ), ” working paper series 2015 – 16. san francisco : federal reserve bank of san francisco, october. bis central bankers ’ speeches

also likely feeding into low core inflation, although to a lesser extent. 5 as noted previously, these price declines have led headline inflation across the globe to behave quite similarly over this time period. even so, most observers expect this source of convergence in inflationary outcomes to eventually fade and thereafter not affect monetary policy paths over the medium term. in contrast, a more persistent source of convergence may be found in an apparent decline in the neutral rate of interest. the neutral rate of interest – or the rate of interest consistent with the economy remaining at its potential rate of output and inflation remaining at target level – appears to have declined over the past 30 years in the united states and is now at historically low levels. 6 similarly, longer - run interest rates appear also to have fallen across a broad group of advanced and emerging market economies, suggesting that neutral rates are at historically low levels in many countries around the world and near or below zero in the major advanced foreign economies. 7 although the reasons for the declines in neutral rates are not perfectly understood and may differ across countries, there are some common drivers, such as slower productivity and labor force growth and a heightened sensitivity to risk. 8 the very low levels of the shorter run neutral rate reflect in part headwinds from the crisis that are likely to dissipate over time. however, if many of the common forces holding down neutral rates prove persistent, then neutral rates may remain low through the medium term, implying a shallower path for policy trajectories. the global economy is also experiencing a downshift in emerging market growth momentum led by china, which may prove somewhat persistent. whereas earlier in the recovery there was a striking divergence between the relatively buoyant growth in major emerging economies and depressed growth in advanced economies, lately the extent of divergence has diminished noticeably. 9 china is undergoing a challenging set of economic transitions. trend growth has slowed substantially and is expected to slow further, and the composition of growth is shifting away from resource - intensive manufacturing and exports toward a greater share for consumption and services. china ’ s investment has slowed sharply recently after accounting for nearly one - third of global investment over the past three years and about one - half of global consumption in certain metals such as iron ore, aluminum, copper, and in five of the six quarters since mid - 2014, the price of oil has decreased for a cumulative decline of 70 percent. see brainard ( 2015b ), hamilton and others ( 2015 ), kiley ( 2015a