Yield curve control

{{Short description|Monetary policy tool}}

{{Use dmy dates|date=December 2021}}

{{Public finance}}

File:Japan bonds.webp in 1990
Zero interest-rate policy started in 1999https://www.weforum.org/stories/2024/03/japan-ends-negative-interest-rates-economy-monetary-policy/#:~:text=%E2%80%9CBOJ%2520decided%2520to%2520implement%2520a,%252C%2520namely%25200.25%2520to%25200.5%2525.
Negative interest rate policy started in 2014

{{legend-line|#00A2FF solid 3px|30 year}}

{{legend-line|#61D836 solid 3px|20 year}}

{{legend-line|#929292 solid 3px|10 year}}

{{legend-line|#F8BA00 solid 3px|5 year}}

{{legend-line|#FF2600 solid 3px|2 year}}

{{legend-line|#73FDEA solid 3px|1 year}}

]]

Yield curve control (YCC) is a monetary policy action whereby a central bank purchases variable amounts of government bonds or other financial assets in order to target yield curve or interest rates at a certain level.{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=Investopedia }} It generally means buying bonds at a slower rate than would occur under a Quantitative Easing policy. It affects long term interest rates, whereas QE is more impactful on shorter term interest rates. Where QE focuses on quantities of bonds, YCC is concerned with the price. {{Cite web|url=https://www.brookings.edu/blog/up-front/2020/06/05/what-is-yield-curve-control/|title=What is Yield Curve Control|date=5 June 2020 |publisher=Brookings.edu }} It can be thought of as a more effective form of QE: In QE the central bank buys bonds, but does not have a target for what interest rate those purchases will bring. In YCC, the central bank intentionally buys enough bonds to reach a certain interest rate target.

Two examples of yield curve control can be found in the post-war United States,{{Cite web|url=https://www.chicagofed.org/publications/economic-perspectives/2021/2|title=Yield Curve Control in the United States, 1942 to 1951|publisher=Federal Reserve Bank of Chicago }} where bonds were purchased to keep interest rates low to allow cheaper government funding of the war effort,{{Cite web|url=https://www.federalreservehistory.org/essays/treasury-fed-accord#monetary|title=The Treasury-Fed Accord, March 1951|publisher=Federal Reserve Bank of St. Louis }} and in Japan, early 21st century,{{Cite news|url=https://www.reuters.com/markets/rates-bonds/japan-set-keep-ultra-low-rates-doubts-over-yield-cap-grow-2022-12-19/|title=BOJ jolts markets in surprise change to yield curve policy|date=20 December 2022 |work=Reuters |last1=Kihara |first1=Leika }} where bonds were purchased to keep long term interest rates at 0%, in an effort to stimulate the economy.{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=Investopedia }}