Moreover, the behaviour of long-term rates in the US in the period between mid 2004 and mid 2005 – famously phrased as a “conundrum” by the then chairman of the Federal Reserve – has raised fears that monetary policy might have lost influence over domestic long-term rates in the face of closely integrated financial markets.
At first sight, this view appears to be supported by simple correlation analyses for the euro area and selected OECD countries. But: does globalisation mean that monetary policy is losing its leverage over domestic long-term interest rates? And if so, does this mean monetary policy is becoming ineffective? I do not want to go too much into the details.