[Federal Register Volume 68, Number 25 (Thursday, February 6, 2003)]
[Notices]
[Page 6226]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2965]


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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 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 January 2004.

FOR FURTHER INFORMATION CONTACT: Robert B. Anderson, Office of Economic 
Policy, Office of Management and Budget, (202) 395-3381.

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

Appendix C

    (Revised February 2003) 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 January 2004. 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-2003.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 2003 based on the economic assumptions from the 2004 
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]
------------------------------------------------------------------------
                                                            10-     30-
                 3-Year                   5-Year  7-Year   Year    Year
------------------------------------------------------------------------
3.1.....................................     3.6     3.9     4.2     5.1
------------------------------------------------------------------------

    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 2004 Budget are presented below. These 
real rates are to be used for discounting real (constant-dollar) 
flows, as is often required in cost-effectiveness analysis.

 Real Interest Rates on Treasury Notes and Bonds of Specified Maturities
                              [in percent]
------------------------------------------------------------------------
                                                            10-     30-
                 3-Year                   5-Year  7-Year   Year    Year
------------------------------------------------------------------------
1.6.....................................     1.9     2.2     2.5     3.2
------------------------------------------------------------------------

    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. 03-2965 Filed 2-5-03; 8:45 am]
BILLING CODE 3110-01-P