Money and Financial Markets
Despite 12 straight increases in the federal funds rate, long-term interest rates remain low by historical standards. For more than three years, the economy has been expanding at an average annual rate of 3.5%. Normally, when economies expand at such a healthy pace, investment opportunities abound, boosting the real rate of return on new business investment. In turn, the high returns on new capital tend to pull up the whole yield structure, including long-term real interest rates.
Suggested citation: "Money and Financial Markets," Federal Reserve Bank of Cleveland, Economic Trends, no. 05-12, pp. 06-07, 12.01.2005.