US monetary policy, macroeconomic news and the global secular decline of interest rates

Boris Hofmann, Zehao Li and Steve Pak Yeung Wu

No 1393, BIS Working Papers from Bank for International Settlements

Abstract: The global secular decline in long-term interest rates since the 1990s has been largely driven by cumulative yield changes during U.S. monetary policy announcement windows (FOMC windows). We document this FOMC-window effect for a group of ten major advanced economies. Based on a term structure model, we show that the effect operates through the expected path of future short-term interest rates rather than term premia. We further find that the global secular decline in interest rates has been concentrated in FOMC windows preceded by macroeconomic news. We interpret this pattern as a “Fed response to news” channel and provide empirical evidence to support this interpretation.

Keywords: bank business models; digital banking; platform finance; financial stability; scenario analysis; sensitivity analysis (search for similar items in EconPapers)
JEL-codes: E43 E52 F42 (search for similar items in EconPapers)
Date: 2026-11
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:1393

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