Investing.com – Federal Reserve policymakers discussed the need to bolster forward guidance in the coming months when they met last month, and suggested that the jury was still out on the use of yield curve control, according to the Fed’s June meeting minutes released Wednesday.
“Various participants noted that the economy is likely to need support from highly accommodative monetary policy for some time and that it will be important in coming months for the Committee to provide greater clarity regarding the likely path of the federal funds rate and asset purchases,” according to the minutes.
There was also support to tie forward guidance to economic metrics, with a number of policymakers suggesting future monetary policy be linked to inflation outcomes.
“Participants generally indicated support for outcome-based forward guidance. A number of participants spoke favorably of forward guidance tied to inflation outcomes that could possibly entail a modest temporary overshooting of the committee’s longer-run inflation goal but where inflation fluctuations would be centered on 2 percent over time,” the minutes showed.
Fed members discussed two tools for conducting monetary policy when the federal funds rate is at its effective lower bound, including forward guidance and large-scale asset purchase programs in supporting employment and inflation and an approach that caps or targets interest rates along the yield curve — a measure allowing central banks to target specific government bond yields through the purchase and sale of bonds, to help keep lending rates near zero.
Debate Over Yield Curve Control
Pointing to a review of the yield caps or targets (YCT) policies the Federal Reserve followed during and after World War II and that the Bank of Japan and the Reserve Bank of Australia are currently employing, nearly all Federal Open Market Committee members indicated that they had many questions regarding the costs and benefits of such an approach.
“The three experiences suggested that credible yield curve target (YCT) policies can control government bond yields… and may not require large central bank purchases of government debt,” the minutes showed. “But the staff also highlighted the potential for YCT policies to require the central bank to purchase very sizable amounts of government debt under certain circumstances … and the possibility that, under YCT policies, monetary policy goals might come in conflict with public debt management goals, which could pose risks to the independence of the central bank.”
With the central bank is likely to persist with ensuring rates remain lower for longer, yield curve control is unlikely to make into the Fed’s toolbox in the immediate future. “Yield curve control is still under discussion, though FOMC members still have “many questions” on the costs and benefits. It’s probably not imminent,” Pantheon Macroeconomics said.
Following their June 9-10 meeting, Fed officials left interest rates in the range of 0%-to-0.25% and signaled that near zero rates would continue through at least 2022.
In their post-meeting statement, they vowed to persist with bond purchases “at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.”
The Fed committed to buying $80 billion a month in Treasuries and $40 billion a month in agency mortgage backed securities.
The Fed’s balance sheet has declined by $12.4 billion to $7.08 trillion as of June. 24, compared with the week prior, driven by a decline in demand for the Fed’s dollar swap lines from overseas central banks.
The U.S. central bank’s balance sheet stood at about $4 trillion just before the pandemic struck in the U.S. in early March.
Threat of a Second Wave
Since the Fed’s last meeting, the U.S. has seen a greater resurgence in infections that has forced states to roll back plans to speed up the pace of reopening businesses.
In testimony before the House Financial Services Committee on Tuesday, Federal Reserve Chairman Jerome Powell, acknowledged the threat of a potential second wave of infections on the economy.
A second wave could “force government and force people to withdraw again from economic activity … and “undermine public confidence, which is what we need to get back to lots of economic activity,” Powell said.
“Output and employment remain far below their pre-pandemic levels. The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” he added.
TORONTO – Cineplex Inc. reported a loss in its latest quarter compared with a profit a year ago as it was hit by a fine for deceptive marketing practices imposed by the Competition Tribunal.
The movie theatre company says it lost $24.7 million or 39 cents per diluted share for the quarter ended Sept. 30 compared with a profit of $29.7 million or 40 cents per diluted share a year earlier.
The results in the most recent quarter included a $39.2-million provision related to the Competition Tribunal decision, which Cineplex is appealing.
The Competition Bureau accused the company of misleading theatregoers by not immediately presenting them with the full price of a movie ticket when they purchased seats online, a view the company has rejected.
Revenue for the quarter totalled $395.6 million, down from $414.5 million in the same quarter last year, while theatre attendance totalled 13.3 million for the quarter compared with nearly 15.7 million a year earlier.
Box office revenue per patron in the quarter climbed to $13.19 compared with $12 in the same quarter last year, while concession revenue per patron amounted to $9.85, up from $8.44 a year ago.
This report by The Canadian Press was first published Nov. 6, 2024.
TORONTO – Restaurant Brands International Inc. reported net income of US$357 million for its third quarter, down from US$364 million in the same quarter last year.
The company, which keeps its books in U.S. dollars, says its profit amounted to 79 cents US per diluted share for the quarter ended Sept. 30 compared with 79 cents US per diluted share a year earlier.
Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs, totalled US$2.29 billion, up from US$1.84 billion in the same quarter last year.
Consolidated comparable sales were up 0.3 per cent.
On an adjusted basis, Restaurant Brands says it earned 93 cents US per diluted share in its latest quarter, up from an adjusted profit of 90 cents US per diluted share a year earlier.
The average analyst estimate had been for a profit of 95 cents US per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
ST. JOHN’S, N.L. – Fortis Inc. reported a third-quarter profit of $420 million, up from $394 million in the same quarter last year.
The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.
Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.
Revenue in the quarter totalled $2.77 billion, up from $2.72 billion in the same quarter last year.
On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.
The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
