There has been a lot of debate over divergences between central bank policy rate projections and market pricing recently. In this post, we used our term premium model to extract estimates of term premia and neutral rates for a selection of economies. Policy rates have risen in 2023 in most of the countries considered. Our model suggests that 10-year term premia have fallen in most of these economies. The market rates expected over the long-term have increased in Mexico and the UK, but fallen in Australia.
Footnote
For more details of the approach used see here and here.
