The Fed's yield curve control debate during the pandemic and its WWII precedent
By
Hanno Lustig
Summary
This article examines the Federal Reserve's consideration of yield curve control (YCC) during the COVID-19 pandemic in June 2020, and traces the historical precedent of the Fed and Treasury pegging the entire yield curve after the U.S. entered World War II in December 1941. It explores the debate among FOMC members about whether unconventional tools retained their potency given already-low long-term yields, and revisits the sole historical U.S. episode of YCC deployment for lessons applicable to the pandemic crisis.
Source
bskyThe Fed's yield curve control debate during the pandemic and its WWII precedentthetwocents.substack.comKey quotes
· 3 pulledthere are no bazookas left in our unconventional but tested toolkit
The Fed found itself at the effective lower bound on rates again
Some Federal Open Market Committee (FOMC) members were concerned that forward guidance and large-scale asset purchases would be less potent than in 2008-2009 because long yields were already so low
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