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Can monetary policy influence long-term interest rates?

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  • Òscar Jordà

Abstract

This Economic Letter argues that the Fed exercises significant influence on long-term rates. The key to reconciling this position with the empirical evidence resides in the gradual pattern of policy interventions characteristic of the Federal Open Market Committee (FOMC). This pattern, a likely reflection of the Fed's response to changes in economic activity in the long run (see Rudebusch 2002), is essential to understanding fluctuations in long-term rates.

Suggested Citation

  • Òscar Jordà, 2005. "Can monetary policy influence long-term interest rates?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue may20.
    • Handle: RePEc:fip:fedfel:y:2005:i:may20:n:2005-09
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    References listed on IDEAS

    as
    1. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June.
    2. Rudebusch, Glenn D., 1995. "Federal Reserve interest rate targeting, rational expectations, and the term structure," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 245-274, April.
    3. Demiralp, Selva & Jorda, Oscar, 2004. "The Response of Term Rates to Fed Announcements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 387-405, June.
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    Cited by:

    1. Zhengyang Chen, 2019. "The Long-term Rate and Interest Rate Volatility in Monetary Policy Transmission," 2019 Papers pch1858, Job Market Papers.

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