The Dark Side of Yield Curve Control Policy

The Dark Side of Yield Curve Control Policy
The Bank of Japan has been pursuing a monetary policy of “yield curve control” (YCC) since 2016, with which it keeps short and long-term interest rates for Japanese debt securities at around 0 percent.

To do this, it buys massive amounts of government bonds.

The Central Bank of Australia has been proceeding in a very similar way since March 2020.

It keeps the three-year interest rate at 0.1 percentage points through bond purchases.

The European Central Bank (ECB) seems to be increasingly warming up to the idea of not only controlling short-term but also long-term interest rates or imposing a cap on them.

The idea of controlling interest rates is not new.


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