Has the Transmission of U.S. Monetary Policy Changed Since 2022?

Philip Barrett and Josef Platzer
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Philip Barrett: International Monetary Fun
Josef Platzer: International Monetary Fun

International Journal of Central Banking, 2026, vol. 22, issue 2, 195-294

Abstract: Activity and inflation responded slowly to the Federal Reserve’s rate hikes in 2022.Was this because the transmission of monetary policy had changed? Or did other shocks offset tighter policy? We use pre-pandemic data to estimate a VAR with monetary policy shocks identified from high-frequency data, and use it as a filter to back out the sequence of structural monetary policy shocks consistent with data since 2022. We compare these implied shocks with the actual shocks and find the difference statistically significant during February–July 2022. These differences imply that monetary transmission had roughly 75 percent of its usual pre-COVID effect. We provide suggestive evidence that weaker monetary policy transmission was the result of a steeper Phillips curve.

Date: 2026
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