The United States Federal Reserve, having already implemented a number of new policies to mitigate the impending effects of a potential oncoming economic depression, has recently become the subject of further speculation in the minds of investors regarding further stimulus measures to be actioned.
Yield-Curve control, the Fed’s typical strategy to ease the strain of a flagging market, is expected to now encompass the capping of yields of government bonds of selected maturity. Traders anticipate these measures will buy up however much it would take to bolster the market.
Central banks, who already operate at zero percent interest rates, are using these measures to signal short to medium term government support to the markets using alternate stimulus measures.
Priya Misra, head of global rates strategy, stated that the Fed “...can’t keep a negative economic outlook without easing monetary policy further.”
While the Fed is already buying trillions of dollars of government debt already this year, new fiscal responses implemented in order to offset the Coronavirus slump seems to blur the once sharp division between central banking practices and government fiscal policy.
Yield-curve control, if actioned to the degree traders seem to predict, outlines a tactical shift by the US Federal Reserve in how willing it is to intercede and therefore prop up the faltering US economy.
Far from unwelcome news, many market experts are warming to the news that the Fed is crossing lines it usually would not consider policy-wise, as the market will thrive amongst even loose suggestions of a fiscal policy beneficial to Wall Street.