Monetary Policy Transmission Map

Market plumbing

Monetary policy transmission map

Select a Fed tool and follow where it first hits markets.

Transmission channelRates & expectations Transmission channelBalance sheet & risk premia Transmission channelCredit, collateral & liquidity Macro feedback loopInflation & reaction function

Policy tools

Policy tool Rates & expectations Easing

Dominant route

Initial price response

Clearing mechanism

Macro implications

What changes the sign

Market impact map

First-order market impact

Market routes

Transmission channels

Market watchlist

What to watch

Public references

• Federal Reserve Board materials on short-term rates, longer-term rates, asset prices, credit conditions and the exchange rate.
• New York Fed materials on implementation, administered rates, reserves, repo and open-market operations.
• Federal Reserve FEDS Notes and New York Fed LSAP materials on portfolio balance, term premia, maturity extension and reinvestment.

• Federal Reserve FEDS research on MBS purchases, mortgage-rate risk premia and secondary-market functioning.
• Federal Reserve standing-repo materials, discount-window materials, and FIMA repo FAQs for liquidity backstops.
• Bernanke-Gertler credit-channel framing for the external-finance premium, bank-lending channel and borrower balance-sheet channel.
• Market proxies include OIS/SOFR forwards, Treasury yields, TIPS real yields, term-premium estimates, MBS spreads, IG/HY spreads, repo rates, bank reserves, mortgage rates, breakevens, CPI and PCE prices.

The watchlist focuses on liquid market proxies and core inflation data that usually reprice before slower macro aggregates.

Educational use only

This tool is for educational purposes only. It is not financial, investment, tax, legal, or personal-finance advice, and should not be relied on to predict actual outcomes.

This website and its content are provided for informational and educational purposes only and do not constitute investment, financial, legal, tax, or other professional advice, nor any offer, recommendation, solicitation, or invitation to buy or sell any security or financial instrument. Any views expressed are solely the author’s own as of the date of publication, are subject to change without notice, and do not necessarily reflect the views, positioning, or risk of Schonfeld.