Fed to Broadly Accept a Steepening Yield Curve: Peterson’s Posen

The video discusses the implications of yield curve steepening, suggesting it indicates rising inflation expectations and growth prospects. It explores the Federal Reserve's cautious approach to yield curve control, highlighting uncertainties in fiscal policy. The speaker argues for managing longer-term yields to better influence fiscal-monetary interactions, cautioning against focusing on short-term yields due to limited economic impact.

What does a steepening yield curve typically indicate in economic terms?

• Stable economic growth

• Rising inflation expectations

• An impending recession

• Decreasing interest rates

Why is the Federal Reserve cautious about implementing yield curve control?

• To maintain currency stability

• Due to high inflation rates

• Because of uncertainties in fiscal policy

• To avoid increasing interest rates

What is one reason the Fed might avoid yield curve control?

• It could lead to higher inflation

• It could stabilize the economy too quickly

• It might be seen as politically motivated

• It would decrease economic growth

Which bond maturities are more likely to be targeted in yield curve control according to the discussion?

• 2-year, 3-year, or 5-year bonds

• 10-year and 30-year bonds

• 15-year and 20-year bonds

• 1-year and 2-year bonds

What is a potential downside of targeting assets that are close substitutes for cash in yield curve control?

• It stabilizes the economy too quickly

• It reduces traction on the real economy

• It leads to higher interest rates

• It increases inflation