Fed Meeting Preview: Will Powell Go For Yield Curve Control?

As the world looks toward central banks’ responses to the pandemic-induced recession, the Federal Reserve’s two-day Open Market Committee (FOMC) meeting began yesterday. Fed Chair Jerome Powell is anticipated to remain dovish on economic policy, although he said in June that […]

article-image

Jerome Powell, Chair, Federal Reserve

share
  • Chairman Powell said in June he was open to yield curve control

As the world looks toward central banks’ responses to the pandemic-induced recession, the Federal Reserve’s two-day Open Market Committee (FOMC) meeting began yesterday. Fed Chair Jerome Powell is anticipated to remain dovish on economic policy, although he said in June that he was open to considering yield curve control efforts. 

Yield curve control is a central bank’s attempt to reach a target interest rate by buying or selling as many bonds as necessary. Proponents argue that keeping long-term interest rates in check is effective in stimulating the economy. 

“In my opinion, Powell and the Fed will likely eventually be forced into explicit yield curve control,” said Luke Gromen, founder and president of Forest for the Trees LLC.  “But in my opinion, they likely will not do so until they absolutely have to.” 

The Fed has indicated that they plan to keep interest rates near zero percent for the foreseeable future. Last month, they committed to keep buying bonds until employment reaches a maximum and inflation stays at two percent. 

Source: Crescat Capital, Tavi Costa

“What we’ve done is, we’ve laid out a path whereby we’re going to keep monetary policy highly accommodative for a long time, really until—really until we reach very close to our goals,” Powell said in December. The Chair’s four-year term ends in February 2022.  

In contrast to the Fed’s approach, the Bank of Japan adapted a yield curve control policy in 2016. Counterintuitively, the implementation of yield curve control allowed the BOJ to purchase less bonds.  [Below from Bloomberg, BOJ]

Source: Bloomberg, BoJ

If Powell pulls the trigger for yield curve control, it could be utilizing the political cover of the BOJ, suggesting that Central Banks don’t have to print as much money to buy bonds after the implementation.

Tags

    Decoding crypto and the markets. Daily, with Byron Gilliam.

    Upcoming Events

    Old Billingsgate

    Mon - Wed, October 13 - 15, 2025

    Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

    recent research

    Research Report Templates (1).png

    Research

    Aave’s revenues have doubled from April lows and are fast approaching all-time highs. With 35% of borrow interest coming from ETH and 55% from stablecoins, Aave is emerging as a powerful proxy as an ETH and stablecoin beta. As looping strategies accelerate growth and Horizon positions the protocol to ride the RWA wave, Aave is shaping up as one of DeFi’s most compelling multi-narrative plays.

    article-image

    Private testnet aims to deliver low-cost settlement with partners including Visa, Deutsche Bank, and OpenAI

    by Blockworks /
    article-image

    Solana saw $78 million in REV for August

    article-image

    Lit Protocol’s Vincent is shifting agentic finance from toy demos to production rails

    article-image

    The new system aims to unify Europe’s fragmented tokenized asset settlement and cut cross-border costs

    by Blockworks /
    article-image

    Tron slashed fees by 60% as Plasma looms, threatening its USDT moat

    article-image

    The acquisition adds evaluation-based funding to Kraken Pro, giving traders access to capital on performance

    by Blockworks /