This is also consistent with findings in the literature which show that the signalling effect of asset purchases is typically moderate at the time they are announced.4 However, we have also seen that, as the outlook improves, the signal that asset purchases send regarding the likely date of a first rate hike becomes increasingly important for anchoring the medium to long-term segment of the curve.
This can also be seen in the greater sensitivity of forward rates to macroeconomic news, as my next slide shows. As expectations of an end to asset purchases build up in the market, expected short-term rates in one year’s time have become increasingly more responsive to changes in the data.