Accessible Version

Accessible Version

Figure 1: Central Bank Policy Rates

Time series’ of central bank policy rates. Chart plots the Fed funds rate and BOE bank rate from January 1st, 1999 to October 28th, 2021, and the ECB deposit rate from November 18th, 1999 to October 28th, 2021. For the Fed funds rate, effective December 16, 2008, target rate is reported as a range. The series shown here represents the upper limit of the federal funds target range established by the Federal Open Market Committee. The y-axis measures the level of policy rates, in percent, and ranges from 0 to 6.5, while the x-axis measures the date from 1999 to 2021. The Fed funds rate initially increases from 4.75 percent in 1999 to 6.5 percent in 2000 before falling below 2 percent in 2003. This is followed by another hiking cycle, where the Fed funds rate reaches 5 percent in 2006, before falling again to 0.25 percent by 2009. It stays at this level until 2015, after which it slowly increases to 2.5 percent by late 2018. In early 2020, it falls again to a level of 0.25 percent, where it stays until the end of the sample. The BOE bank rate initially falls from 6 percent in 1999 to 5 percent later that year before rising contemporaneously with the Fed funds rate, subsequently falling below 4 percent in 2003. It then rises to around 6 percent by 2008, before falling again to 0.5 percent in early 2009. It stays at roughly this level for the remainder of the sample but does increase slightly through 2018 and 2019 before falling to 0.1 percent in March of 2020. The ECB deposit rate initially increases from 3 percent in 1999 to 4.75 percent in 2000 before falling to 2 percent in 2003. It stays at 2 percent for roughly 2.5 years before increasing to 4.25 percent in mid-2008. In keeping with the movements of the Fed funds rate and BOE bank rate, it falls to 1 percent in early 2009. After a slight increase in 2011, it decreases monotonically until reaching 0 percent in 2016, where it stays for the remainder of the sample.

Note: For the fed funds rate, effective December 16, 2008, target rate is reported as a range. The series shown here represents the upper limit of the federal funds target range established by the Federal Open Market Committee. ECB is European Central Bank; BOE is Bank of England.

Source: Bloomberg.

Figure 2: R* in Advanced Economies

Percent

Date United States Euro Area United Kingdom Canada
3/31/1999 3.06 1.95 2.13 2.56
6/30/1999 3.04 1.87 2.02 2.59
9/30/1999 3.15 1.94 2.08 2.74
12/31/1999 3.40 2.06 2.13 2.80
3/31/2000 3.38 2.13 2.08 2.88
6/30/2000 3.44 2.16 2.08 2.93
9/30/2000 3.35 2.28 2.05 3.01
12/31/2000 3.37 2.35 2.10 2.97
3/31/2001 3.28 2.47 2.16 2.98
6/30/2001 3.19 2.80 2.30 3.01
9/30/2001 2.86 2.52 2.33 2.90
12/31/2001 2.94 2.49 2.25 2.82
3/31/2002 2.83 2.48 2.29 2.99
6/30/2002 2.97 2.36 2.30 2.96
9/30/2002 2.85 2.28 2.34 2.97
12/31/2002 2.58 2.18 2.37 2.86
3/31/2003 2.39 1.99 2.35 2.84
6/30/2003 2.36 2.01 2.31 2.54
9/30/2003 2.56 2.06 2.36 2.49
12/31/2003 2.58 2.10 2.37 2.54
3/31/2004 2.64 2.05 2.33 2.50
6/30/2004 2.61 2.05 2.26 2.59
9/30/2004 2.44 1.88 2.21 2.62
12/31/2004 2.51 1.76 2.20 2.61
3/31/2005 2.65 1.70 2.26 2.53
6/30/2005 2.38 1.68 2.32 2.51
9/30/2005 2.29 1.71 2.37 2.59
12/31/2005 2.41 1.78 2.42 2.63
3/31/2006 2.49 1.79 2.41 2.63
6/30/2006 2.50 1.97 2.34 2.55
9/30/2006 2.32 2.00 2.35 2.54
12/31/2006 2.27 2.08 2.38 2.55
3/31/2007 2.40 2.09 2.40 2.58
6/30/2007 2.17 2.15 2.40 2.64
9/30/2007 2.22 2.11 2.38 2.56
12/31/2007 2.37 2.28 2.38 2.39
3/31/2008 2.09 2.35 2.36 2.39
6/30/2008 2.07 2.08 2.33 2.41
9/30/2008 1.81 1.94 2.19 2.51
12/31/2008 0.91 1.41 1.90 2.21
3/31/2009 0.59 0.73 1.68 1.74
6/30/2009 0.78 0.79 1.68 1.60
9/30/2009 0.78 0.84 1.75 1.62
12/31/2009 1.16 0.92 1.72 1.73
3/31/2010 0.89 0.95 1.81 1.80
6/30/2010 0.82 1.07 1.90 1.69
9/30/2010 0.67 1.17 1.90 1.62
12/31/2010 0.66 1.13 1.90 1.69
3/31/2011 0.66 1.26 2.03 1.66
6/30/2011 0.86 1.25 1.96 1.63
9/30/2011 0.72 1.08 1.84 1.77
12/31/2011 0.76 1.06 1.75 1.80
3/31/2012 0.96 0.91 1.73 1.65
6/30/2012 0.73 0.83 1.57 1.60
9/30/2012 0.48 0.72 1.62 1.48
12/31/2012 0.47 0.67 1.63 1.44
3/31/2013 0.50 0.44 1.58 1.54
6/30/2013 0.33 0.51 1.53 1.53
9/30/2013 0.42 0.44 1.55 1.57
12/31/2013 0.53 0.26 1.58 1.64
3/31/2014 0.25 0.32 1.56 1.61
6/30/2014 0.52 0.14 1.65 1.71
9/30/2014 0.55 0.20 1.62 1.80
12/31/2014 0.40 0.23 1.58 1.81
3/31/2015 0.34 0.35 1.58 1.61
6/30/2015 0.49 0.41 1.56 1.50
9/30/2015 0.36 0.39 1.62 1.51
12/31/2015 0.22 0.43 1.66 1.43
3/31/2016 0.38 0.34 1.61 1.44
6/30/2016 0.43 0.31 1.58 1.32
9/30/2016 0.43 0.38 1.59 1.38
12/31/2016 0.38 0.48 1.63 1.31
3/31/2017 0.39 0.63 1.65 1.41
6/30/2017 0.27 0.52 1.70 1.45
9/30/2017 0.28 0.61 1.66 1.39
12/31/2017 0.49 0.74 1.57 1.43
3/31/2018 0.64 0.63 1.51 1.49
6/30/2018 0.66 0.71 1.51 1.43
9/30/2018 0.48 0.63 1.52 1.50
12/31/2018 0.46 0.43 1.49 1.48
3/31/2019 0.35 0.53 1.50 1.47
6/30/2019 0.47 0.51 1.45 1.57
9/30/2019 0.50 0.50 1.46 1.54
12/31/2019 0.41 0.48 1.40 1.46

Source: Holston, Laubach, and Williams (2017).

Figure 3.1: Growth and Monetary News around FOMC Meetings

Growth News (left panel)

Scatterplot showing the change in the S&P 500 in percentage points and the change in the U.S. Treasury yield in basis points after growth news along with the line of best fit. The line is upward sloping, in the midst of upward trending dots.

Monetary News (right panel)

Scatterplot showing the change in the S&P 500 in percentage points and the change in the U.S. Treasury yield in basis points after monetary news along with the line of best fit. The line is downward sloping, in the midst of downward trending dots.

Note: Growth (monetary) news represents cases where the 10−year U.S. Treasury yield and S&P 500 index move in the same (opposite) direction. FOMC is Federal Open Market Committee.

Source: Hoek, Kamin, and Yoldas (2020); Bloomberg; Federal Reserve Bank of New York.

Figure 3.2: Effect of a 100 Basis Point Increase in 10−Year U.S. Treasury Yield on EME Local Currency Bond Yields

Bar chart, showing high and low vulnerability of growth news and monetary news, ranging from 0 to 250 basis points. The chart starts with the series high vulnerability, showing the growth news bar around 100 basis points, and the monetary news bar around 250 basis points. In the low vulnerability series, the growth news bar is around 75 basis points and the monetary news bar is around 150 basis points.

Note: Growth (monetary) news represent cases where the 10−year U.S. Treasury yield and S&P 500 index move in the same (opposite) direction. Countries are placed in high or low vulnerability buckets based on six macroeconomic indicators: inflation, current account deficit, international reserves, government debt, external debt, and private−sector credit growth. EME is emerging market economy.

Source: Hoek, Kamin, and Yoldas (2020); Bloomberg; Federal Reserve Bank of New York; Haver Analytics; International Monetary Fund; Federal Reserve Board staff calculations.

Figure 4: Futures-Based Yields' Reaction to FOMC and ECB Events

FOMC events, 2−hr. event window change

Basis points

y = 0.15 + 0.45x

(0.13) (0.02***)

R-squared = 0.88

UST futures yield Bund futures yield
-3.39 -1.40
1.24 0.77
5.44 1.80
3.85 1.68
-3.19 -1.84
-0.75 -1.01
1.48 1.25
-4.04 -1.86
-2.91 -0.70
-3.30 -1.62
-5.34 -2.32
4.00 2.06
1.84 0.89
3.84 1.81
-6.51 -2.90
5.87 3.46
-13.87 -5.73
5.66 8.90
-1.59 -0.35
5.51 1.84
-8.51 -1.82
-5.56 -1.42
4.48 1.21
13.81 5.28
6.40 3.91
4.43 1.19
-6.16 -1.74
-11.19 -5.72
-25.85 -10.95
2.35 0.43
-45.08 -20.43
7.86 2.57
13.47 3.40
-1.42 0.78
-9.51 -5.46
-0.46 2.30
3.40 2.18
5.82 2.14
-4.04 -2.51
0.92 -0.44
-2.48 -0.32
-8.32 -4.81
10.89 7.61
-9.20 -5.70
1.66 0.30
3.97 2.34
-2.73 2.37
5.65 3.65
-0.44 1.05
4.44 3.01
-0.65 0.22
4.28 1.08
-11.14 -4.33
2.22 1.90
-2.54 -2.62
-0.80 0.67
-0.39 -1.56
-5.13 -1.08
5.32 3.94
2.87 1.19
0.19 2.79
3.78 0.89
-4.81 -2.88
2.66 4.99
0.39 0.37
3.00 1.19
-2.93 -1.47
1.40 0.95
0.77 -2.14
1.59 0.79
19.16 9.60
-8.19 -3.23
-20.07 -11.52
5.61 2.74
1.00 0.09
-1.81 -1.50
10.72 4.30
-1.04 -0.67
-2.02 -1.02
-1.03 -0.82
6.78 2.30
1.99 0.33
4.12 1.29
-6.21 -2.03
-13.39 -3.40
-0.59 -0.15
-10.36 -4.27
-1.16 -2.05
-7.25 -6.55
5.13 2.33
0.20 0.31
-4.94 -2.59
-9.15 -3.91
-2.14 -1.79
-3.79 -0.85
-2.21 -1.33
-4.03 -2.36
0.77 1.24
14.11 4.67
-2.45 -0.84
-9.55 -2.29
3.23 1.58
3.11 0.78
-3.80 -1.57
4.51 2.51

Note: In addition to the scatterplot of points using the data included here, there is a linear line of best fit plotted along the points, sloping upward from about the point (-50,-20) to about the point (25,10). There is a shaded 95% confidence interval that is symmetric across the line of best fit. The interval’s vertical distance is at its smallest closest to the point (0,0) and increases as the horizontal distance from 0 increases. On the furthest horizontal point from 0 (x = -50), it ranges a vertical distance of approximately 2 basis points above and below the line of best fit.

ECB events, 2-hr. event window change

Basis points

y = 0.48 + 0.53x

(0.16***) (0.07***)

R-squared = 0.46

Bund futures yield UST futures yield
14.21 7.87
-3.81 -2.05
9.05 3.75
0.36 1.23
1.56 1.99
-0.52 -0.21
-0.08 -0.79
1.07 1.58
0.16 2.40
-2.79 -0.60
-1.30 -1.36
0.27 0.59
-0.23 -0.20
1.44 0.98
2.73 3.89
3.13 2.50
3.64 2.71
0.70 2.24
-3.08 -1.64
0.70 0.61
1.77 0.80
4.74 2.05
-1.29 -0.81
-1.15 -0.84
1.14 2.08
-1.98 -1.68
-1.72 0.49
-0.11 0.75
4.26 2.91
-3.76 -0.75
1.20 -1.03
1.81 0.99
0.57 -0.76
0.56 0.25
-1.80 0.25
-0.91 0.99
-0.34 0.25
1.96 2.17
-2.16 0.75
1.38 0.25
-0.81 0.72
1.08 0.00
-1.58 -2.00
-1.34 -0.51
1.71 1.55
-1.08 -1.28
0.72 0.96
-2.58 -2.44
-0.98 -1.46
1.35 0.60
-2.07 -1.00
-0.57 2.57
-0.69 0.20
1.19 4.81
-3.53 -3.34
5.99 2.94
-4.64 4.65
-6.75 -7.22
-1.08 -2.11
-2.16 1.30
3.91 6.40
4.65 8.35
2.15 6.24
-1.99 2.68
-3.50 -2.83
-2.60 -5.11
5.27 -1.05
7.32 6.19
3.87 6.19
-3.47 -6.68
4.21 5.44
0.11 -1.34
-2.91 -2.68
0.23 1.84
1.14 4.38
-1.94 -3.25
-1.07 -4.54
0.32 3.12
-0.11 -2.53
-3.55 -4.52
5.76 5.85
5.00 6.04
-3.22 -3.44
0.49 0.62
0.00 -1.03
-1.24 -3.33
1.62 -0.84
4.56 0.87
-0.95 4.22
5.88 5.37
-3.55 -3.05
-7.57 -1.71
-4.56 1.45
2.83 3.17
-2.03 -0.82
-2.35 0.98
0.38 2.78
1.44 1.60
0.39 0.19
-0.71 -1.56
4.93 3.37
-0.74 -0.38
0.37 -0.97
1.36 0.96
-1.05 -1.30
-2.39 0.56
-4.41 -2.83
4.49 4.15
2.12 1.14
-0.46 0.77
14.67 -0.37
4.33 1.16
-3.79 -2.34
4.28 3.84
-1.11 -1.73
-4.11 -0.58
3.20 1.74
4.67 4.92
0.99 -1.98
1.42 -2.90
-4.43 -1.17
4.70 2.58
-1.36 -1.02
4.00 1.61
-1.02 0.42
-3.55 -1.25
1.15 5.72
1.14 3.27
-0.24 -0.40
1.89 3.20
1.64 0.59
-11.76 -8.79
-0.30 -1.94
8.71 4.76
2.31 1.75
-3.59 -0.97
-5.89 -1.76
12.04 7.33
-2.74 3.29
1.78 0.97
-2.36 -1.35
0.14 1.30
0.90 1.14
-3.94 -2.49
2.09 1.20
-1.94 2.03
-1.94 -0.20
-2.25 -1.99
-5.64 -0.19
-2.96 0.60
1.63 1.38
-4.22 -0.20
2.03 2.86
4.38 3.42
-2.01 -1.57
-2.68 -2.34
-2.10 1.90
1.86 0.00
-2.93 -1.17

Note: Horizontal and vertical lines are marked at 0. Black lines are the estimated linear regression lines, and the shaded areas around the regression lines show the 95 percent confidence interval. The inset box in the left (right) panel shows the results of the estimated ordinary least squares regressions where changes in 10-year German (U.S) futures yields are regressed on changes in 10-year U.S. (German) futures yields in a two-hour window around FOMC (ECB) announcements. FOMC is Federal Open Market Committee; ECB is European Central Bank; UST is U.S. Treasury.

In addition to the scatterplot of points using the data included here, there is a linear line of best fit plotted along the points, sloping upward from about the point (-50,-25) to about the point (30,15). There is a shaded 95% confidence interval that is symmetric across the line of best fit. The interval’s vertical distance is at its smallest closest to the point (0,0) and increases as the horizontal distance from 0 increases. On the furthest horizontal point from 0 (x = -50), it ranges a vertical distance of approximately 10 basis points above and below the line of best fit.

Source: Curcuru, De Pooter, and Eckerd (2018).

Last Update: November 19, 2021