Daniel A. Dias; Sophia C. ScottThis paper shows that U.S. commercial banks' funding betas rise predictably with the length, magnitude, and direction of each monetary policy cycle: longer cycles and those with larger changes in the policy rate yield stronger pass-through in both tightening and loosening cycles, with modest asymmetry favoring slightly greater transmission during loosening cycles. Nondeposit liabilities consistently adjust more than deposits. Crucially, at the aggregate banking-system level and across banks grouped by size, this cycle-dependent relationship has remained remarkably stable over three decades, highlighting the durability and predictability of interest-rate transmission to banks' funding costs.
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