When Central Banks Lose Control: Rates and Risk

How Inflation Chaos Is Forcing a Repricing Across the Global Yield Curve

When Central Banks Lose Control: Rates and Risk:

Chart Breakdown:

Interest Rate Academic Papers:

1. WP 1246 – Monetary policy along the yield curve: why can central banks affect long‑term real rates? (March 2025)
   Explores how central banks can shift long‑term real rates through persistent policy changes—even before activity reacts arXiv+6Bank for International Settlements+6arXiv+6Bank for International Settlements+4Bank for International Settlements+4Bank for International Settlements+4.

2. WP 1252 – Monetary policy and the secular decline in long-term interest rates: A global perspective (March 2025)
   Documents how major movements in long-term yields—≈70% of drop 1990–2023—occur around FOMC decisions, creating global path dependency Bank for International Settlements+1Bank for International Settlements+1.

3. WP 1231 – Monetary policy in the news: communication pass‑through and inflation expectations (Dec 2024)
   Using LLMs, shows media is a critical channel translating central bank communication into household inflation expectations Wikipedia+15Bank for International Settlements+15Bank for International Settlements+15.

4. Quarterly Review Dec 2024 – Targeted Taylor rules: responses to demand‑ vs supply‑driven inflation
   Highlights how central banks adjust reaction strength depending on inflation source—crucial for mistiming risk Bank for International Settlements+3Bank for International Settlements+3Wikipedia+3.

5. **Qtr Review Mar 2024 – Quo vadis, r? The natural rate of interest after the pandemic***
   Tracks shifts in natural rate (r*), and how misjudging it can cause policy mistakes Bank for International Settlements+15Bank for International Settlements+15Bank for International Settlements+15.

6. WP 1156 – Monetary policy frameworks away from the ELB (Dec 2023)
   Discusses framework adjustments post‑ELB, including forward guidance and dual mandate challenges Bank for International Settlements.

7. WP 1100 – Getting up from the floor (May 2023)
   Studies pros and cons of abundant vs scarce reserve systems—key for redundancy and balance‑sheet strategy Wikipedia+3Bank for International Settlements+3Bank for International Settlements+3.

8. Annual Economic Report 2024 – Monetary policy in the 21st century: lessons learned (June 2024)
   Provides a retrospective on crisis-era policy, emphasizing coherence, safety margins, and nimbleness Bank for International Settlements+1Bank for International Settlements+1.

9. Annual Report 2025 – The next‑generation monetary and financial system (July 2025)
   Outlines future-proofing central bank operations, including payment system elasticity and tiered banking Wikipedia+10Bank for International Settlements+10Bank for International Settlements+10.

10. WP 1126 – CBDC and the operational framework of monetary policy (Sept 2023, rev Mar 2024)
    Analyses how central bank digital currency could alter reserve frameworks and policy transmission Bank for International Settlements.

11. Qtr Review Mar 2024 – Disagreement over interest rates and policy cycle
    Documents trends in uncertainty about rates, offering insight into forward guidance effectiveness Bank for International Settlements+1Bank for International Settlements+1.

12. Annual Economic Report 2024 – Chapter on operating frameworks and balance sheets
    Examines the role of balance sheet tools (QE/QT) as complements to rate policy Bank for International Settlements+1Bank for International Settlements+1.

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As always, a Pepe for the culture:

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