Monetary policy, financial conditions and real activity: is this time different?

BIS Bulletin  |  No 80  | 
23 November 2023

Key takeaways

  • During the current monetary policy tightening episode, financial conditions co-moved closely with policy rates, especially in the initial stages but with some differentiation across countries.
  • For advanced economies, the tightening of financial conditions was stronger this time than in the past, while its full impact on real activity appears to be taking longer than usual.
  • Financial conditions may continue tightening long after central banks stop raising policy rates, with possible implications for financial stability.