Yield curve control: Difference between revisions
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'''Yield Curve Control''' ('''YCC''') is a [[monetary policy]] action whereby a [[central bank]] purchases variable amounts of [[government bond]]s or other [[financial asset]]s in order to target interest rates at a certain level.<ref>{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=[[Investopedia]] }}</ref> It generally means buying bonds at a slower rate than would occur under a [[Quantitative Easing]] policy. |
'''Yield Curve Control''' ('''YCC''') is a [[monetary policy]] action whereby a [[central bank]] purchases variable amounts of [[government bond]]s or other [[financial asset]]s in order to target interest rates at a certain level.<ref>{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=[[Investopedia]] }}</ref> It generally means buying bonds at a slower rate than would occur under a [[Quantitative Easing]] policy. It effects long term interest rates, where as QE is more impactful on shorter term interest rates.<ref>{{Cite web|url=https://www.brookings.edu/blog/up-front/2020/06/05/what-is-yield-curve-control/|title=What is Yield Curve Control|publisher=[[Brookings.edu]] }}</ref> It can be thought of as a more effective form of QE: In QE the central bank buys bonds, but does not have a target for what interest rate those purchases will bring. In YCC, the central bank intentionally buys enough bonds to reach a certain interest rate target. |
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Two examples of Yield Curve Control can be found in the United States after World War II<ref>{{Cite web|url=https://www.chicagofed.org/publications/economic-perspectives/2021/2|title=Yield Curve Control in the United States, 1942 to 1951|publisher=[[Chicago Federal Reserve]] }}</ref>, where bonds were purchased to fund the war effort, and in Japan, early 21st century<ref>{{Cite web|url=https://www.reuters.com/markets/rates-bonds/japan-set-keep-ultra-low-rates-doubts-over-yield-cap-grow-2022-12-19/|title=BOJ jolts markets in surprise change to yield curve policy|publisher=[[Reuters]] }}</ref>, where bonds were purchased to keep long term interest rates at 0%, in an effort to stimulate the economy.<ref>{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=[[Investopedia]] }}</ref> |
Two examples of Yield Curve Control can be found in the United States after World War II<ref>{{Cite web|url=https://www.chicagofed.org/publications/economic-perspectives/2021/2|title=Yield Curve Control in the United States, 1942 to 1951|publisher=[[Chicago Federal Reserve]] }}</ref>, where bonds were purchased to fund the war effort, and in Japan, early 21st century<ref>{{Cite web|url=https://www.reuters.com/markets/rates-bonds/japan-set-keep-ultra-low-rates-doubts-over-yield-cap-grow-2022-12-19/|title=BOJ jolts markets in surprise change to yield curve policy|publisher=[[Reuters]] }}</ref>, where bonds were purchased to keep long term interest rates at 0%, in an effort to stimulate the economy.<ref>{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=[[Investopedia]] }}</ref> |
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Revision as of 08:39, 21 December 2022
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Yield Curve Control (YCC) is a monetary policy action whereby a central bank purchases variable amounts of government bonds or other financial assets in order to target interest rates at a certain level.[1] It generally means buying bonds at a slower rate than would occur under a Quantitative Easing policy. It effects long term interest rates, where as QE is more impactful on shorter term interest rates.[2] It can be thought of as a more effective form of QE: In QE the central bank buys bonds, but does not have a target for what interest rate those purchases will bring. In YCC, the central bank intentionally buys enough bonds to reach a certain interest rate target.
Two examples of Yield Curve Control can be found in the United States after World War II[3], where bonds were purchased to fund the war effort, and in Japan, early 21st century[4], where bonds were purchased to keep long term interest rates at 0%, in an effort to stimulate the economy.[5]