Animation: Visualizing U.S. Interest Rates Since 2020
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Animation: Visualizing U.S. Interest Rates Since 2020

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Visualizing Interest Rates Since 2020

In March 2020, the U.S. Federal Reserve cut already depressed interest rates to historic lows amid an unraveling COVID-19 pandemic.

Fast-forward to 2022, and the central bank is grappling with a very different economic situation⁠ that includes high inflation, low unemployment, and increasing wage growth. Given these conditions, it raised interest rates to 2.25% up from 0% in just five months.

The above visualization from Jan Varsava shows U.S. interest rates over the last two years along with its impact on Treasury yields, often considered a key indicator for the economy.

Timeline of Interest Rates

Below, we show how U.S. interest rates have changed over the course of the pandemic:

DateFederal Funds Rate (Range)Rate Change (bps)
July 27, 20222.25% to 2.50%+75
June 16, 20221.50% to 1.75%+75
May 5, 20220.75% to 1.00%+50
March 17, 20220.25% to 0.50%+25
March 16, 20200.00% to 0.25%-100
March 3, 20201.00% to 1.25%-150

In early 2020, the Federal Reserve cut interest rates from 1% to 0% in emergency meetings. The U.S. economy then jumped back from its shortest recession ever recorded, partially supported by massive policy stimulus.

But by 2022, as the inflation rate hit 40-year highs, the central bank had to make its first rate increase in over two years. During the following Federal Reserve meetings, interest rates were then hiked 50 basis points, and then 75 basis points two times shortly after.

Despite these efforts to rein in inflation, price pressures remain high. The war in Ukraine, supply disruptions, and rising demand all contribute to higher prices, along with increasing public-debt loads. In fact, a Federal Reserve estimate suggests that inflation was 2.5% higher due to the $1.9 trillion stimulus, an effect of “fiscal inflation.”

Impact on the Treasury Yield Curve

The sharp rise in interest rates has sent shockwaves through markets. The S&P 500 Index has steadily declined 19% year-to-date, and the NASDAQ Composite Index has fallen over 27%.

Bond markets are also showing signs of uncertainty, with the 10-year minus 2-year Treasury yield curve acting as a prime example. This yield curve subtracts the return on short-term government bonds from long-term government bonds.

When long-term bond yields are lower than short-term yields—in other words, the yield curve inverts—it indicates that markets predict slower future growth. In recent history, the yield curve inverting has often signaled a recession. The table below shows periods of yield curve inversions for one month or more since 1978.

Yield Curve Inversion DateNumber of MonthsMaximum Difference (10 yr - 2 yr bps)
Aug 197821 -241
Sep 198013 -170
Jan 19824 -71
Jun 19821 -34
Dec 19886 -45
Aug 19892 -18
Jun 19981 -7
Feb 200010 -51
Feb 20061 -16
Jun 20061 -7
Aug 20067-19
Jul 20222*-48

*Data as of September 9, 2022
Source: Federal Reserve

For example, the yield curve inverted in February 2000 to a bottom of -51 basis points difference between the 10-year Treasury yield and the 2-year Treasury yield. In March 2001, the U.S. economy went into recession as the Dotcom Bubble burst.

More recently, the yield curve has inverted to its steepest level in two decades.

This trend is extending to other countries as well. Both New Zealand and the UK’s yield curves inverted in August. In Australia, the yield spread between 3-year and 10-year bond futures—its primary measure—was at its narrowest in a decade.

What’s On the Horizon?

Sustained Treasury yield inversions have sometimes occurred after tightening monetary policy.

In both 1980 and 2000, the Federal Reserve increased interest rates to fight inflation. For instance, when interest rates jumped to 20% in 1981 under Federal Reserve Chairman Paul Volcker, the U.S. Treasury yield inverted over 150 basis points.

This suggests that monetary policy can have a large impact on the direction of the yield curve. That’s because short-term interest rates rise when the central bank raises interest rates to combat inflation.

On the flip side, long-term bonds like the 10-year Treasury yield can be affected by growth prospects and market sentiment. If growth expectations are low and market uncertainty is high, it may cause yields to fall. Taken together, whether or not the economy could be headed for a recession remains unclear.

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This article was published as a part of Visual Capitalist's Creator Program, which features data-driven visuals from some of our favorite Creators around the world.

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Charted: The Dipping Cost of Shipping

After a dramatic spike during the pandemic, shipping costs have now fallen back to Earth. What does that mean for shippers and the economy?

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The Dipping Cost of Shipping

A little over one year ago, congestion at America’s West Coast ports were making headlines, and the global cost of shipping containers had reached record highs.

Today, shipping costs have come back down to Earth, with some routes approaching pre-pandemic levels. The graphic above, using data from Freightos, shows just how dramatically costs have fallen in a short amount of time.

The Freightos Baltic Index (FBX)—a widely recognized benchmark for global freight rates—has fallen 80% since its peak in late 2021.

Shipping RoutePeak Price (Last 90 days)Recent PriceChange
East Asia -> North America West$2,702$1,323-51%
North America West -> East Asia$1,037$805-22%
East Asia -> North America East$6,296$2,812-55%
East Asia -> North Europe$4,853$2,978-39%
North America East -> North Europe$850$552-35%
North Europe -> North America East$7,102$5,507-22%

Why Shipping Costs Matter

The vast majority of trade is conducted over the world’s oceans, so skyrocketing shipping costs can wreak havoc on the global economy.

A recent study from the IMF, which included 143 countries over the past 30 years, found that shipping costs are an important driver of inflation around the world. In fact, when freight rates double, inflation increases by 0.7 of a percentage point.

Of course, some nations feel the effects of higher shipping costs more acutely than others. Countries that import more of what they consume and that are more integrated into the global supply chain are more likely to see inflation rise as shipping costs elevate.

Falling Freight Rates Are a Good Thing, Right?

Falling shipping costs are great news for everyone except, well…shippers.

While most of us can eventually look forward to improved supply chain efficiency and less inflationary pressure, shipping companies are seeing the end of a two-year boom period.

For example, major shippers like COSCO and Hapag-Lloyd saw a staggering 10x or more increase in profit per 20-foot equivalent unit (TEU) shipped.

For the time being, carriers are canceling voyages and sending obsolete ships to scrap to keep prices from bottoming out completely. In early January, container spot freight rates rose for first time in 43 weeks, signaling that the rollercoaster ride that shipping rates have been on since the start of the pandemic may be coming to an end.

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