What yield curve at equilibrium in the future?

At equilibrium, we can assume that: The nominal short-term interest rate is close to the sum of the real growth rate and inflation; The nominal long-term interest rate is equal to the sum of the short-term interest rate and a term premium, linked to uncertainty about the future interest rate and the default risk. Real potential growth is around 2.5% in the United States and 0.8% in the euro zone; expected medium-term inflation is 2.7% in the United States and 2.4% in the euro zone; the variability of nominal long-term interest rates is high, which leads to the assumption of a term premium of 20 basis points in the United States and 40 basis points in the euro zone, which is higher than the term premium observed in the past. Overall, in the United States, the short-term interest rate (Fed Funds rate) should be around 5.2% in the future and the 10-year Treasury yield should be 5.4 %; in the euro zone, the short-term interest rate (repo rate) should be around 3.2% in the future and the 10-year government bond yield should be 3.7%. We therefore conclude that long-term interest rates are still below their long-term equilibrium level.