Staff Working Paper No. 978
By Iryna Kaminska and Haroon Mumtaz
This paper studies monetary policy transmission mechanisms during QE. Using high frequency yield curve event studies of monetary policy announcements in combination with a dynamic term structure model, we can identify four types of monetary policy surprises: action, signalling (working through expected policy rates), policy uncertainty and QE‑specific gilt supply (both working through term premia). Applying the method to the case of the UK, we find that these channels have often operated together. Importantly, their transmission mechanisms into financial markets and macroeconomy differ, as do their relative strengths. These findings emphasize that for a proper evaluation of QE macroeconomic effects, it is key to identify yield curve channels operating during a particular QE programme.