A Small Contribution to Measuring the Lags in Monetary Policy Transmission

Abstract: From May 2022 to July 2023, holdings of small CDs have risen from virtually nothing to more than $900 billion. While this is a dramatic increase, it has come on the heels of a sharp increase in interest rates, and the increase in CDs did not begin until well after interest rates started rising. In this article, I provide some historical perspective for the recent increase in CDs and retail money market mutual fund (MMMF) balances. What is the typical lag between market interest rate increases and increases in CD and MMMF balances? Is the recent increase unusually large, or does history suggest there is more in store?

Keywords: certificates of deposit (CDs); money market funds; Interest Rates;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2023-09

Volume: 23

Issue: 30