Some on FOMC think US economy will need help 'for some time', minutes show

Policymakers at the US central bank, the Federal Reserve, believe that the economy may require government support for some time and are not yet convinced of the cost-benefit trade-off of using so-called yield curve control measures.

Those were the main takeaways from the minutes of the Federal Open Market Committee's June 9-10 policy meeting.

Various participants believed the economy would require help "for some time", the minutes showed.

In particular, while consumer spending was expected to rebound strongly in the backhalf of 2020, the recovery "was not expected to be particularly rapid beyond this year."

FOMC members also stressed that "significant uncertainty and downside risks" linked to the pandemic still existed, with some market commentary indicating that they appeared to remain predisposed to advocating for additional government spending.

Fed chief Jerome Powell had highlighted the former of those two points the day before, in testimony before a committee from the lower chamber of Congress.

In testimony before the House Financial Services Committee, he said that: "While this bounceback in economic activity is welcome, it also presents new challenges -- notably, the need to keep the virus in check."

On the subject of yield curve control, analysis by Fed staff showed that in the past, including in the US during WWII, YCT had successfully controlled bond yields, their pass-through to private markets and that it might not require big purchases of government debt.

"But the staff also highlighted the potential for YCT policies to require the central bank to purchase very sizeable amounts of government debt under certain circumstances," the minutes showed.

Nonetheless, a Bloomberg survey conducted between 29May -3 June revealed that more than half of economists believed the Fed would eventually walk down the path of YCT - but probably not before September.