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Discount Rates for Cost-Effectiveness Analysis of Federal Programs

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AGENCY:

Office of Management and Budget.

ACTION:

Revisions to Appendix C of OMB Circular A-94.

SUMMARY:

The Office of Management and Budget revised Circular A-94 in 1992. The revised Circular specified certain discount rates to be updated annually when the interest rate and inflation assumptions used to prepare the budget of the United States Government were changed. These discount rates are found in Appendix C of the revised Circular. The updated discount rates are shown below. The discount rates in Appendix C are to be used for cost-effectiveness analysis, including lease-purchase analysis, as specified in the revised Circular. They do not apply to regulatory analysis.

DATES:

The revised discount rates are effective immediately and will be in effect through December 2007.

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FOR FURTHER INFORMATION CONTACT:

Robert B. Anderson, Office of Economic Policy, Office of Management and Budget, (202) 395-3381.

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James D. Foster,

Associate Director for Economic Policy, Office of Management and Budget.

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Appendix C—Discount Rates for Cost-Effectiveness, Lease Purchase, and Related Analyses (OMB Circular No. A-94)

Revised December 2006.

Effective Dates. This appendix is updated annually around the time of the President's budget submission to Congress. This version of the appendix is valid for calendar year 2007. A copy of the updated appendix can be obtained in electronic form through the OMB home page at http://www.whitehouse.gov/​omb/​circulars/​a094/​a94_​appx-c.html, the text of the main body of the Circular is found at http://www.whitehouse.gov/​omb/​circulars/​a094/​a094.html, and a table of past years' rates is located at http://www.whitehouse.gov/​omb/​circulars/​a094/​DISCHIST-2007.pdf. Updates of the appendix are also available upon request from OMB's Office of Economic Policy (202-395-3381).

Nominal Discount Rates. A forecast of nominal or market interest rates for 2007 based on the economic assumptions for the 2008 Budget are presented below. These nominal rates are to be used for discounting nominal flows, which are often encountered in lease-purchase analysis.

Nominal Interest Rates on Treasury Notes and Bonds of Specified Maturities

[In percent]

3-Year5-Year7-Year10-Year20-Year30-Year
4.94.94.95.05.15.1

Real Discount Rates. A forecast of real interest rates from which the inflation premium has been removed and based on the economic assumptions from the 2008 Budget is presented below. These real rates are to be used for discounting constant-dollar flows, as is often required in cost-effectiveness analysis.

Real Interest Rates on Treasury Notes and Bonds of Specified Maturities

[In percent]

3-Year5-Year7-Year10-Year20-Year30-Year
2.52.62.72.83.03.0

Analyses of programs with terms different from those presented above may use a linear interpolation. For example, a four-year project can be evaluated with a rate equal to the average of the three-year and five-year rates. Programs with durations longer Start Printed Page 1564than 30 years may use the 30-year interest rate.

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[FR Doc. E7-308 Filed 1-11-07; 8:45 am]

BILLING CODE 3110-01-P