Wednesday, 10 June, 2020
Based on 29 sell-side analysts’ previews reviewed by MNI, at least 5 (Barclays, Deutsche, Morgan Stanley, NatWest, and UBS) see the Fed taking some action at the June FOMC (vs April FOMC when only MS saw any change).
– The boldest prediction is from UBS, who expect the FOMC to announce strengthened forward guidance, yield curve control (YCC), and an open-ended QE program. Nobody else expects YCC or a formal date-based/metric-based forward guidance to be introduced at this meeting, but 5 see the FOMC announcing a formal QE program (compared to the current setup which involves week-to-week announcements of purchase quantities, aimed at supporting market functioning).
– The parameters for QE range from $50-100bln in monthly Tsy buys; the broad expectation appears to be that such a program would be open-ended in nature.
– Most analysts expect the Fed to eventually adopt YCC, mainly as a complement to strengthened forward guidance. In turn, YCC is expected to target the short end of the curve, while forward guidance is seen likely to be tied to dual mandate objectives being reached as opposed to being date-based.
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