CFA Visual LabPatrik Smid ↗
Interactive CFA economics lab

Monetary policy transmission

Select a policy action, then follow what happens to bonds, yields, banks and the real economy.

Central bank buys bonds
EXPANSIONARY
The transmission chain · Tap any stage
Stage 1 of 5
What happens on the balance sheets?
Central bank
Commercial banking system
Experiment · Bond yield vs bond price
5-year fixed-coupon bond
€1,000 face value · €50 annual coupon
€1,000
At par
€1,150 €975 €800 2% 6% 10% Required yield
5.00%
Move the slider. The promised €50 coupon and €1,000 repayment never change. Only the discount rate changes, repricing the bond's cash flows. Scenario yield settings are illustrative, not predicted policy effects.
CFA nuance: OMO and QE both involve securities transactions, but QE typically uses much larger, longer-maturity asset purchases to influence long-term yields. In modern ample-reserves systems, short-term rates depend heavily on central-bank administered rates, so reserve changes do not mechanically move policy rates. Outcomes also depend on expectations, bank lending conditions and the state of the economy.