Issue 1 · Late October 2026
Central bank interest rates and balance sheets: where money comes from. Each number compares the indicator only with its own past: the share of past months it is higher than; 50 is normal. For prices and rates, what is compared is how far the reading is from its own 10-year average: 100 means the furthest from that average, not necessarily a record price or rate.
This issue
No indicator here is at a historical extreme this issue.
Where each stands: Policy rates 85 (hot), Net share hiking 82 (hot), Fed funds rate 72 (warm) and Fed assets 42 (neutral).
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
Where it stands now
Not combined
These are not combined into one number because “high” means different things: high interest rates mean borrowing costs more, while a large Fed balance sheet means more money in the system. Added together they would cancel out, so each indicator gets its own chart.
What it is linked to
US inflationtoFed funds rateCommon explanation: Cause · same direction
When inflation is above target, the central bank raises rates to cool demand
This issue: US inflation at 64 (warm), Fed funds rate at 72 (warm) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.53 · in step in 37 of 48 5-year periods
Fed funds ratetoYield curveCommon explanation: Cause · opposite direction
Rate hikes lift short-term rates first, flattening or inverting the curve
This issue: Fed funds rate at 72 (warm), Yield curve at 41 (neutral) — at least one is in the neutral range (40–60), so we make no call this issue.
Supported by the dataAgreement +0.77 · in step in 46 of 48 5-year periods
US inflationtoPolicy ratesCommon explanation: Cause · same direction
When a country’s inflation is above target, its central bank raises rates
This issue: US inflation at 64 (warm), Policy rates at 85 (hot) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.54 · in step in 14 of 14 5-year periods
Policy ratestoGerman 10-yr yieldCommon explanation: Cause · same direction
Policy rates set the short end and pull long-term rates along (ECB → German bonds)
This issue: Policy rates at 85 (hot), German 10-yr yield at 100 (hot) — both above normal, in line with the common explanation.
Weak or inconsistentAgreement +0.40 · in step in 6 of 12 5-year periods
Core inflationtoFed funds rateCommon explanation: Cause · same direction
The Fed’s 2% target is set for overall prices, but it uses core inflation, which excludes food and energy, to judge the trend
This issue: Core inflation at 35 (cool), Fed funds rate at 72 (warm) — Core inflation below normal, Fed funds rate above normal, not in line with the common explanation.
Weak or inconsistentAgreement +0.65 · in step in 31 of 44 5-year periods
UnemploymenttoFed funds rateCommon explanation: Cause · opposite direction
When unemployment rises, the central bank cuts rates to support jobs (its dual mandate)
This issue: Unemployment at 44 (neutral), Fed funds rate at 72 (warm) — at least one is in the neutral range (40–60), so we make no call this issue.
Weak or inconsistentAgreement +0.30 · in step in 43 of 48 5-year periods
Fed funds ratetoNet share hikingCommon explanation: Ripple · same direction
Once the Fed changes course, other central banks often follow
This issue: Fed funds rate at 72 (warm), Net share hiking at 82 (hot) — both above normal, in line with the common explanation.
Weak or inconsistentAgreement +0.19 · in step in 36 of 47 5-year periods
Fed assetstoUS stocksCommon explanation: Cause · same direction
Large Fed bond purchases push down long-term rates, investors move the money from the bonds they sell into stocks and other assets, and stock prices get support
This issue: Fed assets at 42 (neutral), US stocks at 94 (hot) — at least one is in the neutral range (40–60), so we make no call this issue.
Not visible in our dataAgreement +0.06 · in step in 6 of 8 5-year periods
In most periods the two moved the way the common explanation says, but their highs and lows do not line up over the whole history, so overall no relationship is visible.