The Use of Yield Curve - Essay Example

As validated by Investing Answers (2011), “investors require a higher rate of return for taking the added risk of lending money for a longer period of time. Many economists also believe that a steep positive curve indicates that investors expect strong future economic growth and higher future inflation (and thus higher interest rates)” (par. 8). This statement was likewise supported by the Federal Reserve Update that closely regulates interest rates to reveal that “Fed officials set a target range for the federal funds rate with a primary goal of keeping economic growth sustainable and inflation in the US economy within the unofficial target range of 1 percent to 2 percent. The Fed has maintained an ultra-low interest rate policy that looks likely to be in place until 2012” (Money Rates, 2011, par. 17). Read More