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Opinion
Tim Duy

The Fed Will Soon Embrace Yield-Curve Control

The central bank may have its doubts now about the strategy, but a worsening economy will force its hand.

The Federal Reserve may not be done yet.

The Federal Reserve may not be done yet.

Photographer: Bloomberg

The Federal Reserve might not be ready to explicitly target yields on U.S. Treasury securities to keep them from rising and hindering the economic recovery, but that doesn’t mean it won’t happen. If you believe the Fed will be under continued pressure to do more to support the economy, it’s tough to bet against the eventual adoption of so-called yield-curve control.

The central bank last week threw some cold water on the idea that yield-curve control, with the minutes of the June 2020 Federal Open Market Committee meeting revealing that policy makers had some qualms about this potential monetary policy tool. In general, they were more inclined to support the use of the already familiar tools of forward guidance and large-scale financial asset purchases known as quantitative easing.