Line chart tracking the central bank assets of the U.S. Federal Reserve, Bank of Japan, European Central Bank. Y-axis: Central bank assets as % of GDP, x-axis: years 2007 – 2021.
Since 2013, Bank of Japan central bank assets rise from near 20% of GDP to over 133% at the end of Q3 2021. U.S. Federal Reserve assets (near 6% of GDP in 2007 to nearly 38% at the end of Q3 2021) and European Central Bank assets (near 13% of GDP in 2007 to near 70% at the end of Q3 2021).
Line chart shows benchmark rates:
- U.S. Federal Funds Rate
- Bank of England Base Rate
- Eurozone Main Refi Minimum Bid Rate
- China 1 Year or Less Rate on RMB
Y-axis: benchmark rate (%), x-axis: years 2000 – 2021
Bank of England and Eurozone rates remained at or near zero as of the end of Q3 2021. U.S. rate stood at 0.25% at the end of Q3 2021. China’s rate was over 4.3%.
Since 2002, China’s 1 Year or Less rate has consistently been highest, rising from above 5% to above 7% by 2008. It fell sharply to above 5% by 2009, then rose in 2011 to roughly 6.6%. It then fell to 6% in 2012 to 2014 and decreased in a series of steps to above 4% by 2016 where it has stayed as of the end of Q3 2021.
The U.S. Fed Funds Rate began near 5.5% and rose briefly to near 6.5%, then declined sharply in a series of steps to 1% by 2004. It then increased sharply to above 5% by late 2007, then fell to near 0.25% by 2009. From 2009 to late 2015 the Fed rate was near 0.25%. From 2016 it rose in a series of steps to 2.5% in mid 2019, but as of the end of Q1 2020 it had fallen to 0.25%, where it remained as of Q3 2021.
The Bank of England Base Rate began just below 6%, increased to 6%, then fell to 4% by 2002. It remained near 4%-5% until late 2007, when it rose to 5.75% It then fell to precipitously to 0.5% in mid 2009, declining still further to 0.1% in March 2020, where it remained as of the end of Q3 2021.
Finally, the Eurozone Main Refi Min Bid Rate began at 3% and increased to near 5% by 2001. From 2001-late 2003 it fell to 2% and remained at that level until 2006, when it rose in a series of steps to above 4% by late 2008. It then fell sharply to 1% by 2009, remained at or just above 1% through 2011, then fell in a series of steps to 0% by late 2014 – 2016, where it remained as of the end of Q3 2021.
Left: Sources: Bloomberg and Wells Fargo Investment Institute. Quarterly data from January 1, 2007 to September 30, 2021. Fed = Federal Reserve. BOJ = Bank of Japan. ECB = European Central Bank. GDP = gross domestic product.
Right: Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2000 to September 30, 2021. Headline central bank policy rates of selected countries. Refi = refinance. Min = minimum. RMB = Chinese Yuan Renminbi.
- Expansion of central bank balance sheets has created ample liquidity supporting the recovery in the past year, led by the Bank of Japan’s soaring balance sheet to counter deflation and the pandemic’s impact.
- Central bank stimulus has outpaced that of the Global Financial Crisis in 2008–2009, judging from the low benchmark interest rates among global central banks. Asset growth at the Federal Reserve and the European Central Bank could begin to slow as strong economic growth encourages tapering of securities purchases.