[Federal Register Volume 60, Number 33 (Friday, February 17, 1995)]
[Notices]
[Page 9414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4078]



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OFFICE OF MANAGEMENT AND BUDGET


Discount Rates for Cost-Effectiveness Analysis of Federal 
Programs

AGENCY: Office of Management and Budget.

ACTION: Revisions to Appendix C of OMB Circular A-94.

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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 are 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 February 1996.

FOR FURTHER INFORMATION CONTACT:
Robert B. Anderson, Office of Economic Policy, Office of Management and 
Budget, (202) 395-3381.
Joun B. Arthur,
Associate Director for Administration.

Memorandum for the Heads of Departments and Agencies

From: Alice M. Rivlin
Subject: 1995 Discount Rates for OMB Circular No. A-94

    On October 29, 1992, OMB issued a revision to OMB Circular No. 
A-94, ``Guidelines and Discount Rates for Benefit-Cost Analysis of 
Federal Programs.'' The revision established new discount rate 
guidelines for use in benefit-cost and other types of economic 
analysis.
    The revised Circular specifies certain discount rates that will 
be updated annually when the interest rate and inflation assumptions 
in the budget are changed. These discount rates are found in 
Appendix C of the revised Circular. The attachment to this 
memorandum is an update of Appendix C. It provides discount rates 
that will be in effect for the period March 1995 through February 
1996.
    The rates presented in Appendix C do not apply to regulatory 
analysis. They are to be used for lease-purchase and cost-
effectiveness analysis, as specified in the Circular.

Attachement

Appendix C

(Revised January 1995)

Discount Rates for Cost-Effectiveness, Lease Purchase, and Related 
Analyses

    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 through the end of February, 1996. Copies 
of the updated appendix and the Circular can be obtained from the 
OMB Publications Office (202-395-7332). Updates of this appendix are 
also available upon request from the Office of Economic Policy (202-
395-3381), as is a table of past years' rates.
    Nominal Discount Rates. Nominal interest rates based on the 
economic assumptions from the budget are presented in the table 
below. These nominal rates are to be used for discounting nominal 
flows, as in lease-purchase analysis.

     Nominal Interest Rates on Treasury Notes and Bonds of Specified    
                         Maturities (in percent)                        
------------------------------------------------------------------------
               3-year                  5-year   7-year  10-year  30-year
------------------------------------------------------------------------
7.3.................................      7.6      7.7      7.9      8.1
------------------------------------------------------------------------

    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 than 
30 years may use the 30-year interest rate.
    Real Discount Rates. Real interest rates based on the economic 
assumptions from the budget are presented below. These real rates 
are to be used for discounting real (constant-dollar) flows, as in 
cost-effectiveness analysis.

 Real Interest Rates on Treasury Notes and Bonds of Specified Maturities
                              (in percent)                              
------------------------------------------------------------------------
               3-year                  5-year   7-year  10-year  30-year
------------------------------------------------------------------------
4.2.................................      4.5      4.6      4.8      4.9
------------------------------------------------------------------------

    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 than 
30 years may use the 30-year interest rate.

[FR Doc. 95-4078 Filed 2-16-95; 8:45 am]
BILLING CODE 3110-01-M