Cross-Bank Comparison Hub — Differentials, Carry, Divergence
Side-by-side views of monetary policy across the world's nine major central banks
What is the Comparison Hub
This hub turns the data we already track per central bank into cross-bank views useful to FX traders, fixed-income desks, and journalists. Every page is built from the same source — current policy rates, market-implied rate paths, and headline CPI for nine central banks (Fed, ECB, BoE, RBA, BoC, BoJ, RBI, SNB, PBOC) — and refreshes whenever the daily data pipeline runs.
What you can do here
- Inspect a 9x9 matrix of policy-rate differentials, both today and projected 12 months out
- Read the same matrix in real terms (nominal rate minus headline CPI)
- Rank all 72 ordered currency pairs by carry, current and forward
- Track the headline divergence index — the standard deviation of the nine policy rates
- Project where each major spread peaks and troughs over the next year
- See where central bank meetings collide within a single week
Each view links to a deeper page with methodology, ranked tables, and downloadable charts.
What Is a Rate Differential and Why Does It Matter?
A rate differential is simply the gap between two countries' interest rates. If the Federal Reserve has set its policy rate at 4.5% and the Bank of Japan has set its at 0.5%, the USD–JPY differential is +4.0 percentage points in favor of the dollar. That seemingly dry number is the engine behind one of the largest trades in global finance: the carry trade.
Here is how it works in practice. A trader borrows yen at 0.5%, converts the yen into dollars, and parks the dollars in a US money-market instrument paying 4.5%. As long as the yen–dollar exchange rate stays roughly where it started, the trader pockets the 4.0 percentage point spread — the "carry" — every year. Multiply that by leverage and large position sizes and you can see why hedge funds, banks, and even Japanese retail investors (the famous Mrs. Watanabe) chase these spreads aggressively.
The catch is currency risk. If the yen suddenly strengthens 5% against the dollar, the trader has to convert dollars back into yen at a worse rate, wiping out a year of carry in a few days. That is why FX traders watch central bank meetings so carefully — a surprise hike from the BoJ or an unexpected cut from the Fed can compress the differential and trigger violent unwinds. Cross-bank comparison tables like the ones below show all 72 ordered currency pairs at once so you can see at a glance where the biggest carries are and where they are about to be eroded by upcoming policy moves.
CIP, Carry Factors, and Divergence-Cycle Dynamics
Covered interest rate parity (CIP) — the no-arbitrage condition that F/S = (1+id)/(1+if) — held tightly across G10 pairs until 2008 but has exhibited persistent violations since. The cross-currency basis, particularly the three-month USD-EUR and USD-JPY basis, widens predictably around quarter-end and year-end as European and Japanese banks compete for dollar funding against constrained balance-sheet capacity at US dealers (Du-Tepper-Verdelhan 2018). Basis dislocations of 30-80bp on the JPY leg are routine in the December turn and feed directly into hedged-yield calculations for foreign holders of USD fixed income; the JGB-vs-hedged-Treasury switch trade hinges on these cross-currency basis levels rather than the headline rate differential.
Cross-sectional FX carry as documented by Lustig, Roussanov and Verdelhan (2011) earns a positive excess return on average, but with negatively skewed payoffs and crash risk concentrated in equity drawdowns and VIX spikes — carry is short a volatility-correlated put. The factor premium has compressed post-2014 as G10 differentials narrowed under synchronized easing. Divergence cycles (Fed tightening while BoJ holds, ECB cutting while BoE holds) generate the largest term-structure dispersions and the richest opportunity set for relative-value rates trades; alignment cycles compress dispersion and shift the alpha source from directional differentials to curve-shape and term-premium plays. Meeting-collision weeks — when two G3 central banks decide within 48 hours — exhibit elevated implied vol in the affected pairs and a measurable risk premium that does not fully unwind in the post-event tape, suggesting persistent compensation for committee-asynchrony risk.
Headline numbers
Comparison views
Rate Differentials Matrix
9x9 matrix of policy rate spreads across all nine central banks, current and 12 months forward.
Real Rate Differentials
Same 9x9 matrix, in real terms — nominal policy rate minus headline CPI for each bank.
FX Carry Ranking
All 72 ordered currency pairs ranked by current carry, with 12-month forward carry side-by-side.
Policy Divergence
Headline divergence index, history chart, and the headline pairs ranked by 12-month spread amplitude.
Meeting Calendar
Six-month calendar of meetings across all nine banks, with collision weeks flagged.
Currency pair deep dives
AUD/USD Rate Differential — RBA vs Federal Reserve
Aussie's commodity beta, the RBA-Fed spread, and what the cycle implies
EUR/USD Rate Differential — ECB vs Federal Reserve
How the ECB and Fed paths shape the world's most-traded FX pair
GBP/USD Rate Differential — Bank of England vs Federal Reserve
Cable's rate-differential anchor and the path of BoE-Fed convergence
USD/CAD Rate Differential — Federal Reserve vs Bank of Canada
Loonie's twin anchors: oil and the BoC-Fed spread
USD/CHF Rate Differential — Federal Reserve vs Swiss National Bank
Carry vs safe-haven flows in the dollar-Swiss franc cross
USD/CNY Rate Differential — Federal Reserve vs People's Bank of China
A managed pair where the rate differential interacts with the daily PBOC fix
USD/INR Rate Differential — Federal Reserve vs Reserve Bank of India
The high-carry pair where INR's depreciation tendency offsets nominal yield
USD/JPY Rate Differential — Federal Reserve vs Bank of Japan
The defining carry pair: a wide nominal spread and the BoJ's unique trajectory