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The Response of Interest Rates to US and UK Quantitative Easing


  • Corresponding author: Jens Christensen, Federal Reserve Bank of San Francisco, 101 Market Street, Mailstop 1130, San Francisco, CA 94105, USA. Email:

  • We thank Thomas Nitschka, seminar participants at the Swiss National Bank and the Bank for International Settlements, and an anonymous referee for helpful comments. James Gillan provided excellent research assistance. The views in this article are solely the responsibility of the authors and not necessarily the views of the Federal Reserve Bank of San Francisco or others in the Federal Reserve System.


We analyse declines in government bond yields following announcements by the Federal Reserve and the Bank of England of plans to buy longer term debt. Using dynamic term structure models, we decompose US and UK yields into expectations about future short-term interest rates and term premiums. We find that declines in US yields mainly reflected lower expectations of future short-term interest rates, while declines in UK yields appeared to reflect reduced term premiums. Thus, the relative importance of the signalling and portfolio balance channels of quantitative easing may depend on market institutional structures and central bank communication policies.