Federal Reserve Bank of New York President John Williams said policy makers are “thinking very hard” about targeting specific yields on Treasury securities as a way of ensuring borrowing costs stay at rock-bottom levels beyond keeping the benchmark interest rate near zero. “Yield-curve control, which has now been used in a few other countries, is I think a tool that can complement — potentially complement — forward guidance and our other policy actions,” he said in an interview Wednesday on Bloomberg Television. “So this is something that obviously we’re thinking very hard about. We’re analyzing not only what’s happened in other countries but also how that may work in the United States.” Yield-curve control — where the central bank caps yields on government bonds of a chosen maturity through potentially unlimited purchases — has been used by Japan for years to stimulate economic activity and was recently adopted in Australia. Investors see the Fed embracing the tool in coming months as policy makers turn their attention toward fostering a strong rebound from the severe downturn caused by the coronavirus pandemic.
(Read more: The Bond Buyer)
