(2/2) MNI View: While current and former........>

FED: (2/2) MNI View: While current and former officials have told MNI the Fed is

actively considering Yield Curve Control at the short-end (see our Policy

articles in the FOMC preview), it is likely to wait a few more months before

making a decision. That scenario seems to be accepted by most market

participants, and market consensus is that it will not happen at this meeting.

- Far more likely at this meeting is an announcement of a more formal QE

program, which is out of consensus for the most part. This would serve a dual

purpose, as the Fed shifts to recovery mode. It would reduce market uncertainty

as the recovery begins. In the April FOMC minutes, "several participants" noted

"without further communication on this matter, uncertainty about the evolution

of the Federal Reserve's asset purchases could increase over time". And it would

mark a shift in the objective of purchases from 'restoring market functioning'

toward keeping longer-term yields low to support the recovery.

- If a QE program is adopted, it would probably have an initial pace similar to

that implied by current NY Fed purchases: ~$80bln in Tsys per month.