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The Phase-Dependent Effects of Monetary Policy: Plateau vs Cycle

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Abstract

Monetary policy dynamics can be split into two phases: cycle and plateau. This paper examines how these two phases of the policy rate shape monetary policy transmission to interest rates. We provide new evidence that monetary policy surprises have stronger effects during plateau phases than during tightening or easing cycles. This pattern holds in the United States, euro area and United Kingdom. It is not driven by unconventional policies, hysteresis from past cycles, or anticipation of future cycles. It operates through revisions to medium-term policy expectations and holds beyond the lower monetary policy uncertainty and background noise characterizing plateau phases

Suggested Citation

  • Rose Portier, 2026. "The Phase-Dependent Effects of Monetary Policy: Plateau vs Cycle," Documents de travail du Centre d'Economie de la Sorbonne 26008, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:26008
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    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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