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According to analysts at Wells Fargo, negative interest rates from the Federal Reserve simply do not appear to be on the list of policy tools at this stage. They also consider that current conditions do not signal an immediate need for the FOMC to implement an explicit yield target.

Key Quotes: 

“We have now entered the blackout period during which Fed policymakers refrain from public comment ahead of the next Federal Open Market Committee (FOMC) meeting on June 10. The FOMC has responded quickly throughout this crisis and has not stood on ceremony waiting for a scheduled meeting to introduce new policy tools.”

“One deliverable that we should be able to count on at the June meeting is the return of the Summary of Economic Projections (SEP). At the height of uncertainty in March, the Federal Reserve signaled it was more focused on bringing order and liquidity to financial markets than it was in forecasting what Chair Powell described at the time as “just not something that’s knowable” in reference to the economic projections.”

“We suspect that may open the door to implicit forward guidance, a tool heralded by policymakers before the current crisis as a primary mechanism for influencing policy. Policy tools that are unlikely to play an important role at the June 10 meeting include negative interest rates, yield curve control and adjustments to the interest the Fed pays banks on excess reserves (IOER).”

“We expect the Fed will continue reducing the pace of asset purchases on a weekly basis.”