The domestic transmission channels may encompass first, a rise in perceived consumer wealth through increases in asset prices; second, the rebalancing of investor portfolios toward assets that are imperfect substitutes of those purchased by the Fed, typically with higher risk-adjusted returns, thereby making funds cheaper across many productive areas; and third, signaling that policy interest rates will remain low for an extended period of time, contributing further to the flattening of the yield curve.
BIS central bankers’ speeches  1  So far, the expansionary monetary policies in the United States and other advanced countries have been effective at normalizing the functioning of financial markets and, to a certain extent, still open to debate, firming the pace of the ongoing economic recovery.1 While these benefits were important, there have been some costs and risks associated with the unusually lax monetary policies of advanced countries, among which the following stand out.