Since the beginning of the year, nominal overnight index swap (OIS) rates have been pulled in opposite directions by two competing forces (left-hand chart, Slide 3). On the one hand, market-based measures of inflation compensation have persistently put upward pressure on nominal rates, as one would expect to see at this stage of the economic cycle.
Small and medium-sized enterprises in particular still aren’t feeling enough of the monetary policy accommodation. We call this an impaired transmission mechanism.