Understanding Yield Curve Control [YCC] Policy in 6 minutes

Описание: WHAT IS YIELD CURVE CONTROL?
-Under YCC, the central bank commits to buy whatever amount of bonds the market wants to supply at its target price
Once bond markets internalize the central bank’s commitment, the target price becomes the market price.

How YCC differs from QE?
QE deals in quantities of bonds.
YCC focuses on prices of bonds.

What can be learnt from BoJ experience?
Since YCC in 2016, BoJ purchased government bonds at slower pace
yields on 10-year bonds at historically low levels
credible YCC policy can be more sustainable for central banks than a quantity-based asset purchase program.

Downside of YCC
put the central bank’s credibility on the line.
runs the risk of letting inflation overheat while holding to its promise.