US | Fed needs to calm impatient markets

To slow the rise in bond yields and tamp down on accelerated expectations for an increase in official interest rates, we think Fed officials will change tactics and intervene verbally. Most likely they will emphatically affirm their patient and dovish stance, which accords with their new policy framework.

What you will learn about:

  • We expect policymakers to emphasize they are ‘closely monitoring’ rising bond yields and the unwanted tightening impact these could have on financial conditions. 
  • A rise in yields and inflation expectations is warranted considering the much stronger economic outlook and increased Treasury issuance. 
  • We doubt the Fed is ready to immediately implement yield curve control or lengthen the maturity of its QE asset purchases, but these are the next policy options.

Topics: United States, Monetary policy, Federal Reserve, Macro Highlights, Heavy Industry, North America

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