Template-Type: ReDIF-Paper 1.0
Author-Name: Boris Hofmann
Author-X-Name-First: Boris
Author-X-Name-Last: Hofmann
Author-Name: Zehao Li
Author-X-Name-First: Zehao
Author-X-Name-Last: Li
Author-Name: Steve Pak Yeung Wu 
Author-X-Name-First: Steve Pak
Author-X-Name-Last: Yeung Wu
Title: Monetary policy and the secular decline in long-term interest rates: A global perspective
Abstract: We demonstrate that almost 70% of the secular decline in long-term interest rates across advanced economies between the early 1990s and 2023 occurred in the three days surrounding U.S. monetary policy announcements (FOMC windows). By contrast, other central banks' announcements had only limited effects, if any, on the long-run direction of long-term interest rates, both domestically and across countries. The persistent global effect of the FOMC window reflects the combination of the concentration of declines in U.S. bond yields in this window and large interest rate spillovers from the U.S. to other countries. We further find that the decline in interest rates during FOMC windows is closely associated with pure monetary policy shocks and not with information effects. Moreover, the rate decline on FOMC announcement days is primarily driven by changes in real and expected short rates rather than inflation expectations and term premia. These findings highlight the pivotal role of U.S. monetary policy news in shaping global long-term interest rate dynamics.
Creation-Date: 2025-03
File-URL: https://www.bis.org/publ/work1252.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1252.htm
File-Format: text/html
Number: 1252
Keywords: monetary policy, bond yields, interest rate trends, global financial cycle
Classification-JEL: E43, E52, F42
Handle: RePEc:bis:biswps:1252