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Money and Financial Markets

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The secular decline in long-term rates that began in 1982 resulted primarily from a decline in the inflation expectations associated with a sustained disinflation. However, as inflation approached zero after the 2001 economic downturn, policymakers became concerned about their ability to deal with a potential deflation. Short-term interest rates were taken down and kept near or below inflation, and the FOMC’s policy statements emphasized its intent to keep rates low for a considerable period. Such an emphasis probably kept long-term rates low.

Suggested citation: “Money and Financial Markets,” Federal Reserve Bank of Cleveland, Economic Trends, no. 05-06, pp. 05-07, 06.01.2005.

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