The FED's monetary policy is working: Long-term financing is becoming significantly more expensive in the USA

The Fed's monetary policy has become more restrictive in recent weeks, although key interest rates were not raised at the last meeting.

Here are some answers as to why this is the case.

Interest rates for US government bonds with a term of 10 years have risen in recent weeks from 4% in August to 4.7% today. Long-term financing rates for companies and consumers have followed suit. The interest rate for real estate loans has reached 7.6%. The highest level since 2000!

This means that financing conditions are becoming more restrictive, even though the key interest rate has not changed.

The reason: the monetary policy of the central banks works in different ways. The short-term key interest rate is only one of the Fed's tools. The transmission mechanism is multifaceted. For example, the Fed influences expectations through targeted communication. Or it directly influences interest rates for longer maturities through bond purchases. Since the beginning of 2022, the Fed has been scaling back its bond purchase program.

If you would like to take a closer look at this topic, you can watch the presentation by Argia Sbordone of the Federal Reserve Bank of New York entitled "The Federal Reserve in the 21st Century - Implementation and Transmission of Monetary Policy".