Report
When did long-term interest rates stop keeping pace with expected inflation?
One after the other, central banks are moving to "yield curve control", controlling long-term interest rates. The goal is to make monetary policy more effective and to ensure borrower solvency. Given the implementation of this policy, long-term interest rates no longer react to their usual determinants. In particular, the effect of changes in expected inflation on long-term interest rates disappears. We therefore look at the relationship between changes in expected inflation and changes in the long-term interest rate. Expected inflation has had no effect on long-term interest rates since: 2018 in Japan; Early 2020 in the euro zone; Early 2020 in the United States, which provides an estimate of the effective date of implementation of yield curve control.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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