ZLB increases equities-oil correlation – St Louis Fed research
The assets were uncorrelated until late 2008, when Fed took federal funds rate to zero
The ultra-loose monetary policy implemented by the Federal Reserve after the financial crisis in 2008 has led to a correlation between oil prices and equity returns, research published by the Federal Reserve Bank of St Louis finds.
The relationship between oil and equities at the zero lower bound by Paulina Restrepo-Echavarria and Brian Reinbold says “the correlation coincides with the Federal Reserve’s monetary policy transition to the zero lower bound (ZLB), in which the Fed’s policy rate –
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