Federal Reserve policy has resulted in an increase in short-term interest rates relative to long-term interest rates. As these rates move closer to parity, concern has risen over the onset of a recession if the relationship inverts, i.e., short rates become greater than long rates. The goal of monetary policy is to promote growth with stable inflation. But what if policymakers get it wrong and raise rates too much? An assessment of past inversions and outcomes can provide perspective.
Inversion of Short-Term vs. Long-Term Interest Rates
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