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Federal Reserve Bank of Cleveland
Economic Commentary
The Fed’s Yield-Curve-Control Policy
Owen F. Humpage
Abstract

The recent global financial crisis left governments in many advanced countries with very heavy debt burdens and their central banks with huge portfolios of government bonds. With many central banks today still facing policy rates that are uncomfortably close to zero, some may follow the example of Japan, which recently added a new long-term interest rate target to its short-term target to give itself “yield-curve control.” The Federal Reserve’s foray into similar territory around the Second World War suggests that combining yield-curve control with quantitative easing when government borrowing needs are substantial can create constraints on monetary policy that are not easily removed.


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Owen F. Humpage, "The Fed’s Yield-Curve-Control Policy", Federal Reserve Bank of Cleveland, Economic Commentary, issue November, 2016.
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Keywords: yield curve; interest rates; central banks; monetary policy; bonds; Japan
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