Paul Beaudry Paolo Cavallino Tim Willems
The sharp rise in long-term interest rates since 2020 is difficult to explain from slow-moving fundamentals. This column shows that narrow windows around nonfarm payroll releases and speeches by prominent Federal Reserve policymakers capture 80-90% of the observed increase in long-term US yields, despite covering only 24% of trading days. These events primarily shift expectations about the policy-rate path rather than the natural rate of interest. This suggests that natural rate of interest may anchor long-term rates less firmly than standard theory assumes, allowing shifts in monetary policy perceptions to generate persistent, and potentially self-validating, movements in yields.
Πηγή: VoxEU