How to think about the neutral real interest rate?

The neutral real interest rate is the one that appears in the Taylor rule (the function of the central bank’s short-term interest rate formation ). It normally corresponds to the real interest rate that balances supply and demand for goods and services in the medium term when inflation is stable, equal to both expected inflation and the central bank’s inflation target. But this neutral real interest rate is difficult to determine. It depends on: Factors that structurally influence demand for goods and services (fiscal policy, propensity to consume, etc.); Factors that structurally influence the supply of goods and services (demographics, productivity gains and their determinants); The risk premium on risky bonds and the yield curve slope (the term premium); The sensitivity of demand for goods and services to the real interest rate. In a situation where, in the future: Fiscal policies are becoming more restrictive; The supply of goods is slowing down (population ageing); then the trend in the neutral real interest rate is in theory ambiguous. If the yield curve steepens or if default risk premia rise, it should fall. But few variables actually seem to significantly influence the neutral real interest rate.