The Coming U.S. Interest Rate Tightening Cycle: Smooth Sailing or Stormy Waters?

Publication:
The Coming U.S. Interest Rate Tightening Cycle: Smooth Sailing or Stormy Waters?

dc.contributor.author	Arteta, Carlos
dc.contributor.author	Kose, M. Ayhan
dc.contributor.author	Ohnsorge, Franziska
dc.contributor.author	Stocker, Marc
dc.date.accessioned	2015-09-15T15:22:06Z
dc.date.available	2015-09-15T15:22:06Z
dc.date.issued	2015-09-15
dc.description.abstract	Since the global financial crisis, the exceptionally accommodative monetary policy stance of the U.S. Federal Reserve (Fed) has helped support activity, bolstered asset valuations, and reduced risk premia. In addition, it has been instrumental in boosting capital flows to emerging and frontier market economies (EFEs). As the U.S. economy improves, the Fed is expected to start raising policy interest rates in the near term (an event widely referred to as “liftoff”) and thus commence a tightening cycle for the first time in nearly a decade. The mid-2013 “taper tantrum” episode is a painful reminder that even a long-anticipated change in Fed policies can surprise markets in its specifics, and lead to significant financial market volatility and disruptive movements in capital flows to EFEs. Recent debates have focused on the potential impact of the liftoff on EFEs, but there are also significant risks associated with the pace of subsequent rate increases, which is currently expected to be very gradual, but could accelerate at a time when EFE policy buffers are eroding. This Policy Research Note presents a comprehensive analysis of the changes in global conditions since the taper tantrum, risks of disruptions during the upcoming Fed tightening cycle, potential implications for EFEs, and policy options.	en
dc.identifier.doi	10.1596/22629
dc.identifier.uri	https://hdl.handle.net/10986/22629
dc.language.iso	en_US
dc.publisher	World Bank, Washington, DC
dc.relation.ispartofseries	Policy Research Note;
dc.rights	CC BY 3.0 IGO
dc.rights.holder	World Bank
dc.rights.uri	http://creativecommons.org/licenses/by/3.0/igo
dc.subject	long-term yields
dc.subject	growth prospects
dc.subject	economic fundamentals
dc.subject	Dollar strength
dc.subject	interest rates
dc.subject	business cycle
dc.subject	monetary policy
dc.subject	macroprudential policy
dc.subject	international policy coordination
dc.subject	tightening cycle
dc.title	The Coming U.S. Interest Rate Tightening Cycle	en
dc.title.subtitle	Smooth Sailing or Stormy Waters?	en
dc.type	Working Paper	en
dc.type	Document de travail	fr
dc.type	Documento de trabajo	es
dspace.entity.type	Publication
okr.date.disclosure	2015-09-15
okr.date.doiregistration	2025-05-05T12:35:34.122662Z
okr.doctype	Publications & Research
okr.doctype	Publications & Research::Working Paper
okr.externalurl	http://www.worldbank.org/en/research/brief/policy-research-note-no2-the-coming-us-interest-rate-tightening-cycle-smooth-sailing-or-stormy-waters
okr.globalpractice	Macroeconomics and Fiscal Management
okr.globalpractice	Finance and Markets
okr.guid	317051468188368385
okr.identifier.report	100014
okr.language.supported	en
okr.topic	Finance and Financial Sector Development::Currencies and Exchange Rates
okr.topic	Macroeconomics and Economic Growth::Business Cycles and Stabilization Policies
okr.topic	Macroeconomics and Economic Growth::Economic Forecasting
okr.topic	Macroeconomics and Economic Growth::Economic Growth
okr.topic	Macroeconomics and Economic Growth::Fiscal & Monetary Policy
okr.topic	Macroeconomics and Economic Growth::Inflation
okr.unit	Office of the Chief Economist, Development Economics Vice Presidency (DECVP)
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relation.isAuthorOfPublication.latestForDiscovery	5807995a-9e0a-5d56-b622-d4d19e723613