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Money and Financial Markets

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The federal funds rate gets attention, not because everyone borrows or lends at that rate (only banks do), but because its movement affects other rates at which people do borrow and lend. A good overview of how these other rates have changed is provided by the yield curve, which plots interest rates on Treasury securities against their maturity. The latter half of 2004 has seen a gradual flattening of the yield curve. Since last month, three-month rates have increased from 2.08% to 2.21% as 10-year rates fell from 4.22% to 4.15%. This merely continued an earlier trend: In June, the three-month rate stood at 1.32% and the long rate at 4.75%.

Suggested citation: “Money and Financial Markets,” Federal Reserve Bank of Cleveland, Economic Trends, no. 05-01, pp. 05-07, 01.01.2005.

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