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Lessons from Past Monetary Easing Cycles, Accessible Data

Figure 1. The nature of easing episodes

149 easing episodes

  • 124 others
  • 25 “inflation-abating”
    • 11 inflation-successes
      • 5 soft-landings
      • 6 growth-failures (recessions)
    • 14 inflation-failures

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Figure 2. Macroeconomic behavior in past easing episodes

2a: Inflation-Success Episodes - Policy Rate
Percent

Period Policy rate +1 Std. Dev -1 Std. Dev
t-6 8.089 11.483 4.695
t-5 7.978 10.421 5.535
t-4 8.300 10.276 6.324
t-3 9.078 11.763 6.392
t-2 9.400 12.158 6.642
t-1 9.544 12.273 6.816
t 10.189 13.524 6.853
t+1 8.622 10.939 6.305
t+2 7.911 10.179 5.643
t+3 7.300 9.586 5.014
t+4 6.778 8.585 4.970
t+5 6.356 8.022 4.689
t+6 6.222 7.770 4.675

2b: Inflation-Success Episodes - Core Inflation
Percent (4-quarter)

Period Core inflation (4-quarter) +1 Std. Dev -1 Std. Dev
t-6 6.087777778 9.3676626 2.807892956
t-5 6.231111111 9.473492352 2.98872987
t-4 6.144444444 8.994598436 3.294290453
t-3 6.141111111 8.988971907 3.293250316
t-2 5.577777778 8.00805954 3.147496015
t-1 5.291111111 7.670861331 2.911360891
t 5.036666667 7.423631266 2.649702067
t+1 4.673333333 6.992239325 2.354427341
t+2 4.435555556 6.671981896 2.199129215
t+3 4.101111111 6.438312667 1.763909556
t+4 3.781111111 6.262161516 1.300060706
t+5 3.401111111 5.858296719 0.943925503
t+6 3.147777778 5.384895219 0.910660337

2c: Inflation-Success Episodes - Real GDP growth
Percent (4-quarter)

Period Real GDP growth (4-quarter) +1 Std. Dev -1 Std. Dev
t-6 2.2459 4.570524891 -0.078724891
t-5 2.008055556 4.476579655 -0.460468544
t-4 2.251766667 4.612316163 -0.10878283
t-3 2.892633333 5.308961877 0.47630479
t-2 3.181044444 5.748808244 0.613280645
t-1 3.2197 5.904854152 0.534545848
t 2.758988889 5.359973956 0.158003821
t+1 1.470533333 4.278613946 -1.337547279
t+2 0.631877778 3.88907395 -2.625318395
t+3 0.601155556 3.019616458 -1.817305347
t+4 1.450644444 4.287828464 -1.386539575
t+5 2.495 4.457887499 0.532112501
t+6 3.598388889 4.65418525 2.542592528

2d: Inflation-Success Episodes - Unemployment rate
Percent

Period Unemployment rate +1 Std. Dev -1 Std. Dev
t-6 6.988888889 10.54643174 3.431346041
t-5 7.133333333 10.62976008 3.636906586
t-4 7.144444444 10.45658541 3.832303479
t-3 7.111111111 10.28854893 3.933673289
t-2 7.1 10.17123754 4.028762464
t-1 7.155555556 10.10221091 4.208900201
t 7.388888889 10.29725804 4.480519739
t+1 7.644444444 10.46051933 4.828369556
t+2 7.933333333 10.76131848 5.105348185
t+3 8.277777778 11.07723209 5.478323466
t+4 8.477777778 11.29192853 5.663627028
t+5 8.511111111 11.37224919 5.649973031
t+6 8.4 11.27836759 5.521632407

2e: Inflation-Failure Episodes - Policy Rate
Percent

Period Policy rate +1 Std. Dev -1 Std. Dev
t-6 11.480 14.692 8.268
t-5 12.070 16.280 7.860
t-4 11.690 15.184 8.196
t-3 12.090 15.913 8.267
t-2 12.000 15.624 8.376
t-1 13.210 17.824 8.596
t 14.040 18.913 9.167
t+1 12.820 17.276 8.364
t+2 11.550 15.850 7.250
t+3 10.820 14.990 6.650
t+4 10.230 13.967 6.493
t+5 9.900 13.486 6.314
t+6 10.310 14.060 6.560

2f: Inflation-Success Episodes - Core Inflation
Percent (4-quarter)

Period Core inflation (4-quarter) +1 Std. Dev -1 Std. Dev
t-6 9.018181818 11.93222306 6.104140576
t-5 9.454545455 12.7947142 6.114376705
t-4 10.09090909 14.75769697 5.424121214
t-3 9.863636364 14.31071917 5.416553561
t-2 9.218181818 13.76764732 4.668716315
t-1 8.754545455 13.34983949 4.159251419
t 7.845454545 11.11634544 4.574563647
t+1 7.490909091 10.6285689 4.35324928
t+2 7.272727273 10.19474401 4.350710535
t+3 7.163636364 9.899060545 4.428212182
t+4 6.9 9.135173371 4.664826629
t+5 6.536363636 8.730115093 4.342612179
t+6 6.363636364 8.607415643 4.119857084

2g: Inflation-Success Episodes - Real GDP growth
Percent (4-quarter)

Period Real GDP growth (4-quarter) +1 Std. Dev -1 Std. Dev
t-6 3.040181818 5.634213345 0.446150291
t-5 2.248909091 4.759569022 -0.26175084
t-4 1.255181818 3.214141124 -0.703777488
t-3 1.965818182 3.935303588 -0.003667224
t-2 1.135636364 2.81504711 -0.543774383
t-1 1.634727273 3.692222599 -0.422768054
t 1.953181818 3.424579781 0.481783856
t+1 1.677727273 4.37792138 -1.022466835
t+2 2.250090909 5.155641406 -0.655459588
t+3 1.723090909 5.015187003 -1.569005185
t+4 1.913 4.960900392 -1.134900392
t+5 2.502909091 4.90507226 0.100745922
t+6 2.602545455 4.454380672 0.750710237

2h: Inflation-Success Episodes - Unemployment rate
Percent

Period Unemployment rate +1 Std. Dev -1 Std. Dev
t-6 6.209090909 12.02690056 0.391281262
t-5 6.163636364 11.93724403 0.3900287
t-4 6.209090909 11.92266327 0.495518551
t-3 6.227272727 11.867147 0.587398454
t-2 6.290909091 11.88813243 0.693685753
t-1 6.372727273 11.908446 0.837008546
t 6.436363636 11.82937258 1.043354694
t+1 6.563636364 11.88477773 1.242494996
t+2 6.727272727 11.89468812 1.559857337
t+3 6.945454545 12.0313888 1.859520288
t+4 7.109090909 12.06881964 2.149362178
t+5 7.163636364 11.97970794 2.347564785
t+6 7.154545455 11.74221668 2.566874229

Note: Due to data limitations for some variables, averages are calculated based on data for 9 of the 11 successful "inflation-abating" easing episodes and for 10 of the 14 unsuccessful "inflation-abating" easing episodes.

Source: Staff calculations

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Appendix Figure 1. Implied inflation target with 1 percent band

Left-hand side figure
Percent

Period Target -1ppt Target Target +1 percentage point
1970 7 8 9
1971 7 8 9
1972 7 8 9
1973 7 8 9
1974 7 8 9
1975 7 8 9
1976 7 8 9
1977 7 8 9
1978 7 8 9
1979 7 8 9
1980 3 4 5
1981 3 4 5
1982 3 4 5
1983 3 4 5
1984 3 4 5
1985 3 4 5
1986 3 4 5
1987 3 4 5
1988 3 4 5
1989 3 4 5
1990 1 2 3
1991 1 2 3
1992 1 2 3
1993 1 2 3
1994… 1 2 3
1995… 1 2 3

Right-hand side figure
Percent

Period Target -1ppt Target Target +1 percentage point
1970 9 10 11
1971 8.6 9.6 10.6
1972 8.2 9.2 10.2
1973 7.8 8.8 9.8
1974 7.4 8.4 9.4
1975 7 8 9
1976 6.6 7.6 8.6
1977 6.2 7.2 8.2
1978 5.8 6.8 7.8
1979 5.4 6.4 7.4
1980 5 6 7
1981 4.6 5.6 6.6
1982 4.2 5.2 6.2
1983 3.8 4.8 5.8
1984 3.4 4.4 5.4
1985 3 4 5
1986 2.6 3.6 4.6
1987 2.2 3.2 4.2
1988 1.8 2.8 3.8
1989 1.4 2.4 3.4
1990 1 2 3
1991 1 2 3
1992 1 2 3
1993 1 2 3
1994… 1 2 3
1995… 1 2 3

Note: Milani (2020) and staff calculations.

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Last Update: May 31, 2024