FOMC minutes: Yield Curve Control (YCC) not ruled out”¦ yet – UOB

Senior Economist at UOB Group Alvin Liew reviewed the publication of the FOMC minutes of the June event.

Key Quotes

“The FOMC minutes discussion about policy tools surrounding forward guidance, large-scale asset purchases and yield curve caps/targets (YCT) provided a clear indication the Fed is not done with easing yet. That said, a visibly missing negative interest rate discussion reinforced the view that negative policy rate is not a policy consideration ‘in the Fed’s policy tool kit’.”

“The YCT review centered on three episodes, the US during and after World War II, the BOJ and the RBA. FOMC participants generally saw the Australian experience as most relevant for the US in the current circumstances. Despite all the concerns about YCT, there were positive aspects as well and the Fed will continue to review the efficacy and issues concerning the use of YCT (i.e. low but not out of the list of Fed’s policy tools).”

“We expect the Fed to maintain status quo in the upcoming July FOMC but we believe the Fed will still ease monetary policy further especially when the expectation of an ‘unprecedented’ 2Q comes to pass. US 2Q GDP data will be released on 30 July, the day after the July FOMC. We expect the Fed to implement YCT as a means to make monetary policy even more accommodative, to be announced possibly by the 15/16 September 2020 FOMC.”