What to Expect from Cumulative FOMC Announcements: An Analysis of Global Interest Rates

Abstract

Cumulative changes in sovereign yields during FOMC announcement windows contain critical information for explaining the persistent variations in the yields, predicting future yields and excess bond returns, and determining interest rate expectations and term premia. We estimate a dynamic term structure model with shifting endpoints to study the cumulative effects of U.S. monetary policy on world yield curves. The model highlights expected interest rates as a key channel through which U.S. monetary policy influences global interest rates.

Keywords: Monetary policy, term structure of interest rates, global financial cycle

JEL Classification: E43, E52, F42