Central bank announcements of asset purchases and the impact on global financial and commodity markets

Reuven Glick and Sylvain Leduc

No 2011-30, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We present evidence on the effects of large-scale asset purchases by the Federal Reserve and the Bank of England since 2008. We show that announcements about these purchases led to lower long-term interest rates and depreciations of the U.S. dollar and the British pound on announcement days, while commodity prices generally declined despite this more stimulative financial environment. We suggest that LSAP announcements likely involved signaling effects about future growth that led investors to downgrade their U.S. growth forecasts lowering longterm US yields, depreciating the value of the U.S. dollar, and triggering a decline in commodity prices. Moreover, our analysis illustrates the importance of controlling for market expectations when assessing these effects. We find that positive U.S. monetary surprises led to declines in commodity prices, even as long-term interest rates fell and the U.S. dollar depreciated. In contrast, on days of negative U.S. monetary surprises, i.e. when markets evidently believed that monetary policy was less stimulatory than expected, long-term yields, the value of the dollar, and commodity prices all tended to increase.

Keywords: Open market operations; Monetary policy; Prices (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (9)

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Journal Article: Central bank announcements of asset purchases and the impact on global financial and commodity markets (2012)
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