Indeed, research on U.S. bond yields across the whole spectrum of maturities finds that all yields respond significantly to unanticipated changes in the Fed’s short-term interest-rate target and that the size and pattern of these responses has not changed much over time (Kuttner, 2001; Andersen and others, 2005; and Faust and others, 2006).
Empirical studies also find that U.S. monetary policy actions retain a powerful effect on domestic stock prices. 1 If globalization has not constrained the ability of U.S. monetary policy to influence domestic financial conditions, why are long-term interest rates and key asset prices so correlated across economies?