) : “ measuring the natural rate of interest redux ”, hutchins center on fiscal & monetary policy at brookings, working paper 15 lund, k., k., k. tafjord and m. øwre - johnsen ( 2016 ) : “ what drives the risk premium in nibor? ”, economic commentaries 10 / 2016, norges bank rachel, l. and t. d. smith ( 2015 ) : “ secular drivers of the global real interest rate ”, staff working paper 571, bank of england zhu, f. ( 2016 ) : “ understanding the changing equilibrium real interest rates in asiapacific ”, bis working papers 567 1 the spread between the money market rate and the expected key policy rate ( the interest rate premium ) can vary somewhat over time ( see lund et al ( 2016 ) for a discussion of the premium in the norwegian three - month money market rate ). 5 / 5 bis central bankers'speeches

that is consistent with balanced developments in the economy has fallen. this is reflected in the low level of global interest rates. the decline in real interest rates has been particularly marked over the past 15 – 20 years. in 2001, when inflation targeting in norway was adopted, real long - term interest rates were around 3 percent. now, the same interest rates are around zero. chart : forces driving the fall in the global real interest rate the causes of the decline in interest rates are complex. in recent years, extraordinary measures by many central banks have pushed down long - term rates. over a longer time horizon, the factors behind the decline in interest rates are more structural in nature. the savings glut in 1 / 5 bis central bankers'speeches emerging economies, particularly china and oil exporting countries, has been one important factor. savings have probably also increased in many countries as a result of demographic developments and a more uneven distribution of income. at the same time, investments in many advanced economies have been low, possibly reflecting prospects for low returns on investment in productive capital. in the wake of the financial crisis, conditions of a more cyclical nature have also contributed to the fall in interest rates. while deleveraging has pulled up savings, greater uncertainty may have dampened the willingness to invest. these developments have consequences for monetary policy. the level of the real interest rate that is consistent with balanced developments in the economy is usually referred to as the neutral interest rate. the difference between the actual real interest rate and the neutral real interest rate provides an indication of whether monetary policy is expansionary or contractionary. a real interest rate that is below the neutral rate stimulates economic growth, while a higher real interest rate dampens growth. the neutral interest rate is not directly observable. central banks must nevertheless form a perception of how expansionary or contractionary monetary policy is. in the past few decades, international estimates of the neutral real interest rate have fallen and are now at 1 percent or below in many countries ( see rachel et al ( 2015 ), laubach et al ( 2015 ), hamilton et al ( 2015 ), constancio ( 2016 ) and zhu ( 2016 ) ). obviously, international interest rate developments affect norwegian interest rate setting, particularly through the exchange rate channel. and norges bank ’ s estimate of the neutral interest rate has been gradually revised down in pace with international developments. the bank ’ s forecasts are now based on the assumption that a neutral nominal money market rate