WASHINGTON - Changes in monetary policy have "surprisingly strong" effects on forward real rates far down the road, according to research by a Federal Reserve policymaker, noting that a 100 basis-point increase in the 2-year nominal yield on an FOMC announcement day is associated with a 42 basis-point increase in the 10-year forward real rate.

In the first draft of a paper on 'Monetary Policy and Long-Term Real Rates' published Thursday, Fed Gov. Jeremy Stein said while this finding is at odds with standard macro models based on "sticky nominal prices," the responsiveness of long-term real rates to monetary shocks most likely reflect changes in term premia.

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