My favorite Bloomberg headline of all time is: “Former Fed Chief Yellen Says Rates Could Next Move Up or Down.” Wow, how insightful. But of course, she was refering to The Fed Funds Target rate which she kept at 25 basis points seemingly forever. However, current Fed Chair Jerome Powell could either raise, lower of keep rates constant, depending on the state of economy.
But then again, both the ECB and Bank of Japan are currently at zero (ECB) and below zero (BOJ). The US Fed is headed in a direction that differs from other central banks.
While Powell has been increasing The Fed Funds Target rate AND shrinking The Fed’s balance sheet, Europe is drowning in negative target rates (Eurozone, Switzerland, Sweden, Denmark) as is Japan.
But in terms of central bank balance sheets, only the US is shrinking their balance sheet.
There are currently around $9 trillion of bonds trading at negative interest rates.
As we stand today, the US Treasury yield curve is downward sloping at tenors 1-3 years.
The current implied policy curve for The Fed is declining (meaning Fed Fund rate cuts are implied in 1-3 years.
So, former Fed Chair Janet Yellen thinks rates could go up or down.