Notes: Duration is the length of the phase in months (including any period at the end of the phase when rates are on hold). Amplitude is the sum of rate changes in percentage points (pp) over the entire phase (including any rate changes in either direction). Velocity is the total change in the policy rate in percentage points (pp) over the first six months of the phase. Rates in-sync with phase is the mean number or mean size in pp of rate changes in "in-sync" with the phase, i.e., rate increases for a tightening phase and rate decreases for an easing phase. Means are calculated as the average for each economy across all easing or tightening phases. EA is the euro area, with policy rate data starting in January 1999. Individual members of the euro area only include policy rate data through December 1998. Otherwise, policy rate data covers a period from January 1970 through May 2024, with a later start for some economies due to data limitations.

The statistics for individual economies in Table 1 also show substantial heterogeneity across the sample by some measures. For example, in some countries, the average duration of tightening phases is much shorter than that of easing phases—such as 24 and 27 months for tightening phases in Japan and the euro area, respectively, compared to 156 and 138 months for the corresponding easing phases. In other economies different phases have more similar durations—and in Spain and Belgium the average duration of tightening phases is even longer than that of easing phases (albeit this only includes the pre-1999 period). In some countries, the pace of rate adjustments is substantially greater—whether measured by amplitude, velocity, or the average size of rate changes—although this often reflects a larger share of the respective sample occurring during periods when inflation (and corresponding nominal policy interest rates) were higher.

Some of these differences across easing and tightening phases, as well as across economies, could be explained by different shocks triggering the start of each type of phase, as well as constraints around the lower bound. Specifically, some easing phases (such as around the 2008 Global Financial Crisis and 2020 COVID-19 pandemic) were triggered by severe shocks that quickly affected many economies, causing central banks to lower interest rates aggressively and contributing to the higher initial velocity of rate adjustments during easing phases. These aggressive rate adjustments during easing phases, however, may not necessarily correspond to similar velocity and pace for tightening phases, as recoveries tend to occur more gradually over time. The longer average duration of easing phases, however, particularly for some countries with rates around zero, may also partly reflect a limited ability to provide monetary stimulus due to the lower bound.

# III.1.2 Economic Activity and Inflation during Rate Cycles

In order to assess how the economy evolves in response to changes in policy rates, we follow the standard approach in the business cycle literature of evaluating the evolution of key macroeconomic variables around the cycle’s turning points. In this case, we focus on the turning points indicating the start of easing and tightening phases as defined in Section II.3 and listed in Appendix Table 1.

We focus on the evolution of six macroeconomic variables that are central to the analysis of monetary policy and which have decent country coverage for the long period on which we focus: GDP growth, growth of industrial production (IP), growth of employment, the unemployment rate, headline CPI inflation, and core CPI inflation. The first two variables focus on real economic activity, the middle two on the labor market, and the final two on inflation. Each variable is 18