Why has inflation in the United States been so stable since the 1990s?

The analysis of inflation dynamics and their possible changes over time is a key input in the design of monetary policy, particularly in the context of the strategy reviews recently undertaken by the Federal Reserve System and currently under way at the European Central Bank and other central banks. In this article, we study the causes of the stability of US inflation over the business cycle since the 1990s. We conclude that it is mainly due to a reduced sensitivity of firms’ pricing decisions to their cost pressures.

How do financial markets react to monetary policy signals?

We map ECB policy communications onto yield curve changes and study the information flow on monetary policy decision dates. We find that different monetary policy measures exert effects on different segments of the interest rate term structure, with policy rate changes mostly influencing the short-end of the curve and quantitative easing measures acting more on the long-end. The impact of forward guidance policies, on the other hand, reaches its peak at intermediate maturities.

Global Weakness Index – reading the economy’s vital signs during the COVID-19 crisis

The Global Weakness Index (GWI) is a real-time measure of how weak the global economy is. We use this index to assess on the spot how the repercussions of the coronavirus (COVID-19) crisis are playing out. After the release of certain soft indicators on March 2, 2020 the GWI increased sharply – much faster than in the 2008 crisis. And at the time of writing it remains at a record high.


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