The yield curve has continued to move down and flatten, showing an inversion at some rates. The shift is quite noticeable in comparison to the yield curve of one year ago, which was itself slightly flat by historical standards. The closely watched 3-year, 3-month and 10- year, 3-month spreads stand at –16 and zero basis points. Such a flat yield curve traditionally has indicated either slow economic growth or low expectations of inflation. Certainly in the 1990–92 period, real factors proved more important, and the spread widened despite a sustained fall in inflation. Inflation has dominated more recently, although in 1998 inflation and the spread have again moved in opposite directions.
Suggested citation: “Interest Rates,” Federal Reserve Bank of Cleveland, Economic Trends, no. 98-10, pp. 05, 10.01.1998.