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 – 2022.
Since 2013, Bank of Japan central bank assets rise from near 20% of GDP to 135% at the end of Q2 2022. U.S. Federal Reserve assets (near 6% of GDP in 2007 to 37% at the end of Q2 2022) and European Central Bank assets (near 13% of GDP in 2007 to 69% at the end of Q2 2022).
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 – 2022
Eurozone rates remained at or near zero as of the end of Q2 2022. The U.S. rate stood at 1.75% and the Bank of England base rate stood at 1.25% at the end of Q2. China’s rate was 3.7%.
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, declining to 3.7% at the end of Q2 2022.
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%, then rose to 1.75% by Q2 2022.
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, rising to 1.25% at the end of Q2 2022.
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 Q2 2022.
Left: Bloomberg and Wells Fargo Investment Institute. Quarterly data from January 1, 2007 to June 30, 2022. Fed = Federal Reserve. BOJ = Bank of Japan. ECB = European Central Bank. GDP = gross domestic product.
Right: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2000 to June 30, 2022. Headline central bank policy rates of selected countries. Refi = refinance. Min = minimum. RMB = Chinese Yuan Renminbi.
- Once-ample liquidity is responding to central banks’ less aggressive monetary policy since the start of the pandemic. Financial stress has climbed to a two-year high, creating increasingly stiff headwinds for credit-sensitive and leveraged parts of the economy.
- Central-bank stimulus has outpaced that of the Global Financial Crisis in 2008 – 2009, signaling an extended period of adjustment to bring central-bank balance sheets back in line with their historic norms.