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I encounter this question in the paper by DRECHSLER et al. (2021) (Banking on deposit). How to understand that "interest income is close to a moving average of past interest rates, consistent with the high duration of bank assets. The rates on these assets are set at origination and remain locked in until they roll off, which makes interest income slow-moving and relatively insensitive to the short rate." from this figure?

I think bank assets (loans) generate interest income for banks, but I do not know how to tell the "moving average" trend of interest income and past interest rates.

Thank you very much in advance.

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    $\begingroup$ Is this just a question of what the moving average is? The N-month moving average of a time series equals the mean of the last N periods (including the current) of the series. E.g., the 12 month moving average of a series in Jan 2021 equals the mean of the series from Feb 2020-Jan 2021. $\endgroup$ Apr 1 at 12:18
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    $\begingroup$ Could you put a link to the paper in the question? I'm assuming that this is the one that you're referring to: onlinelibrary.wiley.com/doi/abs/10.1111/jofi.13013 $\endgroup$
    – jmbejara
    Apr 1 at 20:21

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