Figure 1 shows that the natural rate
declined substantially during the
recession and did not start to recover
until the end of 2014. Currently, the
median estimate is –2.1%, far below its
long-run level of about 2.1%. The fall in
the natural rate during the recession is
explained by low expected productivity
growth. With projected low growth, the
economy would need less saving and
more spending to use resources fully,
hence the lower natural rate of interest. During the economic recovery, the natural rate was kept low by
weak demand due to a larger propensity to save in the aftermath of the financial crisis.