Asymmetric expectations of monetary policy

We study the determinants of the asymmetric behaviour of monetary policy expectations in the United States, Germany and the United Kingdom. A common factor based on macroeconomic data and survey variables has predictive ability above and beyond yield based factors for negative changes in expected rates during an easing cycle, but not for increases in expected rates during a tightening in monetary policy. At the same time, macroeconomic information does not have any asymmetric effect on the conditional distribution of term premia. We complement previous findings on the asymmetric predictability of expected rates by showing that monetary policy easing during crises is predictable. This is also relevant for policymakers, as the yield curve does not always provide an accurate picture of the expected future stance of monetary policy at turning points.